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Why profit maximization is not always the aim of a business firm?
Wiki User
∙ 12y ago
Profit maximization can often mean sacrificing other things to obtain it which isn't desirable in alot of cases. An example is the environment or abusing human rights. As society has evolved theres been an increased demand for Corporate Social Responsibility (CSR) and this has led to alot of companies not directly aiming for profit maximization.
Thats not to say that profit maximization and a CSR approach can't co-exist, companies such as General Electric capitilize on this new demand for CSR to actually profit.
Look up corporate social responsibility for more info, its a huge topic these days
Wiki User
∙ 12y ago
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Goal of the firm?
profit maximization &wealth maximization of shareholders.
What are the difference between value maximation and profit maximation?
Value maximization and profit maximization are very much related, the main difference being- value maximization means increases in owners' wealth achieved by maximizing of the value of a firm's common stock. profit maximization is the process by which a firm determines the price and output level that returns the greatest profit. the other difference among the two could be sited as- value maximization is seen as long term objective of a firm, whereas profit maximization is generally a short term objective.
Why profit maximization is not regarded as the core financial objective of firm?
Profit Maximization is a short term objective as all it aims for is to generate a higher revenue for the period.This objective is generally followed if the firm is highly leveraged and a higher profit is required to service it. Wealth Maximization is followed as it looks to increasing the market value of the firms share capital and thus leads to an overall development of the firm and its capacity.
What are some of the problems involved with the use of profit maximization as the goal of the firm How does the goal of maximization of shareholder wealth deal with those problems?
Problems involved with the use of profit maximization as the goal of the firm due to numbers of reasons. 1 It ignore the timing of return. 2 It ignores the timing of returns. 3 It ignores the risk.
What is the advantage and disadvantage of profit maximization?
A company that applies profit maximization is primarily focused on profit and will exhaust all its efforts to achieve the maximum profit possible. However, employing this strategy puts the firm to the risk of losing everything due to being so entrenched with widening its profitability.
The differences between goal of a firm and profit maximization?
A goal of firm isn't always profit driven, it can be any cause. Profit maximization is revenue driven, making more money is it focus.
Shareholder wealth maximization is considered to be a more appropriate goal for the firm than profit maximization because?
Shareholder wealth maximization is considered to be a more appropriate goal for the firm than profit maximization
Goal of the firm?
profit maximization &wealth maximization of shareholders.
Why Profit maximization can never be the objective of a firm?
Profit maximization IS an objective of a firm, but its not the ONLY objective. A firm will have different long term and short term goals which will vary depending on the current business cycle. If you need a more specific answer, please ask a more specific question. - Stavka
What is 'value of a firm'?
The 'value of a firm' is connected with profit maximization. It is the present value of the firm's current profit and the future profit. It determines the value accurately.
What is a firm's value?
The 'value of a firm' is connected with profit maximization. It is the present value of the firm's current profit and the future profit. It determines the value accurately.
What are the difference between value maximation and profit maximation?
Value maximization and profit maximization are very much related, the main difference being- value maximization means increases in owners' wealth achieved by maximizing of the value of a firm's common stock. profit maximization is the process by which a firm determines the price and output level that returns the greatest profit. the other difference among the two could be sited as- value maximization is seen as long term objective of a firm, whereas profit maximization is generally a short term objective.
Which is more comprehensive objective profit maximization or shareholder wealth maximization?
If the company is public listed (trades in the stock market) their aim is shareholder wealth maximization whereas for a privately owned firm a profit maximization objective is appropriate.
What are the basic objectives of financial management?
The objective of financial management is wealth maximization rather than profit maximization. Wealth maximization means the total value of the firm.
Why profit maximization is not regarded as the core financial objective of firm?
Profit Maximization is a short term objective as all it aims for is to generate a higher revenue for the period.This objective is generally followed if the firm is highly leveraged and a higher profit is required to service it. Wealth Maximization is followed as it looks to increasing the market value of the firms share capital and thus leads to an overall development of the firm and its capacity.
What are some shortcomings of the goal of profit maximization?
Profit maximization includes some shortcomings like it ignores the risk that corresponds to the project's stream of cash flow. The timing of returns are ignored with this objective and it does not have as much relevance to a monopoly firm.
What are the objectives of a modern business firm?
Profit maximization sales maximisation growth maximisation utility maximisation satisfying behavior long run survival welfare objectives
