Why profit maximization is not a goal of firm?

Answer 1

Profit determine if you stay in business at all as no business can operate at a loss!

Maximization of these profits has key essentials for any business here is but a few as there are many vast reason and applies as following;

Reduced wasted costs - if output volume or the costs of operations very low provides a measure of optimal management performance and reduced waste. In a large firm means higher corporate tax rates or payments.

Increased Capital for re-investments- if mass profits exist then more money can be reapplied into the business for either market growth or new product development without loans or debts. In a large firm means loss of borrowing needs to an extent!

Investment rating performance- its high profit margins attracts investors as another source of sustainability and market growth garnering more resources for revenues. In a larger firm means consistent demands for higher dividend vs capital expansion or operations.

Banked assets for investments and future downturns- like a savings account per an individual many wish to garner a safety level of assets to shelter against downturn markets, meet future obligations such as employee retirements and even lawsuits. Yes the more holdings a large firm gets the more the lawsuits and interest rates.

Buying power and expense management- most businesses like to build an operations accounts that will cover operations for a year to even up to five years. This buying power enables businesses to negotiate pay now for bulk services at set at current prices to Dodge inflation or rising costs. A large corporate firm practicing this may get consumer flack for increasing prices!

LARGE FIRMS Avoid them as these profits mean: High Taxes as Corporate Tax Rates are very high and Garner them as Targets for Lawsuits, Wage Disputes, Hostile Take-overs and more attacks for those earnings - and void real performance of future works as sheltered fund operations enacts a safe have mentality and reduces aggressive market psychology withing a large corporate firm! Also, outside forces such as consumer ideas of market price as large volumes of holdings also increase any businesses security an added cost - the more the money the more the envy and it's assaults apply for a business.........most large corporate firms try to avoid mass holdings as in the past even to today many large global companies have had foreign kidnappings/ransoms and more threats on securing smart operational strategies this may include lower cost smaller operations that may see more costs in loss of life vs... income earned in foreign markets.

The Reasons is Economic Management Responsibility

--To a small business owner it's about maximum profits for the end of a career or work establishment to a large firm it's about managing it's economic fluctuations as to stay operational for terms longer than a single human life by not so large in holdings it loses it's competitive edge in a market or enacted as a target loss of standing in a market! There for a large firm establishes it's self as a solid economic resource in the labor market with yes turn overs in labor and as an industry establishment bases or foundation for any given economic sector forced to manage goods or even aid in the regulations of resource management. At a large firm level flexibility is a different matter than a small business that sees it in maximum profits it provides a different playing field large firms is more at an economic responsibility level with profit motivation.

Large firms holdings economically can impact interest rates in the economy and must set it's responsibilities accordingly if this makes any sense the more money held also means to some degree less stimulated growth to other sectors of industry - a just in time use of assets permits more diverse products and opportunities in a region (eliminating the one company town that may impact a region/city or community when it's resources dry up examples closed mining towns). Only a few large firms regulate themselves in a market to some degree other don't and the effects vary either internal its demise or like a sinking ship takes many along with it! As there is a different level or count of loss the large the volume hence reason government imposes high corporate taxes apply to help regulate loss and enable diversification!