Why is profit maximization an inappropriate goal

What is the most important goal of a company why? Is profit maximization good or bad? What is the best profit maximization structure? Why is profit maximization an inappropriate goal? Is profit maximization an appropriate goal for financial managers? What is the most appropriate goal of the firm? What is the most important of the three financial management decisions? Which of the following is the most appropriate goal of financial management? What are the disadvantages of wealth maximization?

What is meant by wealth maximization? How do you achieve wealth maximization? How do you maximize wealth? How do you calculate shareholders wealth? How do you maximize shareholders value? How do you determine fair market value per share? What is fair value of share? Is the appraised value the market value? Previous Article What does Masters by research mean? Next Article Why do firms want to revenue Maximise? This approach may lead to low morale and could also negatively impact the company's public image.

Fulfilling informal social and environmental responsibilities also costs money. Therefore, companies that maximize profits may cut corners in recycling, renewal and reuse of resources. They may also avoid expenses that prevent pollution and other negative effects on the environment. The company may also not participate in socially responsible programs, such as volunteerism and community service programs.

The ways in which someone achieves that, however, can sometimes be inappropriate, such as bribing government to enact laws favoring your business to keep out competitors. Yes, profit maximization is the primary goal of a business. Wealth maximization: To stay invested and multiply your invested money. The term is used for long-term investors. Short-term investors work for profit maximization.

They sell their shares, as and when they get profit from the market. Problems involved with the use of profit maximization as the goal of the firm due to numbers of reasons. Uncertainity and timing are some of the problems. 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. Profit maximization is the ONLY appropriate goal for a business. Even under a so-called "social responsibility" regime, a business only engages in such schemes because it thinks it can increase profits by doing so. Explain the rationare for selecting shareholder wealth maximization as the objective of the firm.

Include a consideration of profit maximization as an alternative goal. Profit Maximization is a process that companies undergo to determine the best output and price levels in order to maximize its return. Companies usually adjust production costs, sale prices, and output levels as a way of reaching its profit goal. Profit maximization is a good thing for a company, but can be a bad thing for consumers if the company starts to use cheaper products or decides to raise prices.

Profit Maximization is an interesting and rather deep issue in Economics. Please understand that this question can be answered from various approach and interpretation. There are other disciplines like Business and Management which offers a slightly different answer. For example, if you are a Finance student, you might use the term to maximize shareholder value.

From my understanding, profit maximization alone cannot be an appropriate goal for a firm. When I teach my students, I often ask them, if each of you start a company today, will the reason to do so, just to maximize profit?.

Although many firms do aim to maximize profit in their existence, not all do so. When we say maximize profit, this means to get the most profit in the firm's existence. And there are other firms that don't. Other goals of the firm can be expansion or growth, where they focus on establishing more branches or growing larger, while other firms focus on sales maximization, where they focus on selling more. There are also other firms that put the environment or social issues as their goal. Apart from these different goals of firms, we need to understand that different firms have different goals.

A small grocery shop will have a different goal than a multinational company. And a different environment can also affect the goals of the company. If the firms operates in a monopolistic environment, then profit maximization is possible, as it's the only firm. If the firm operates in a perfectly competitive environment, the goal of profit maximization is not possible, as profit can be influenced by new firms who enter the environment and old firms who exit it.

The goal of maximization of shareholder wealth is meant by; first, in most cases. A firm cannot survive with mere profit maximization, but must increase long-term security through investment and meeting shareholder expectations.

This will increase their productive capacity for the furture as well as encourage the risky capital investment of the shareholders. Everyone knows that profit is the life blood of every organization. Profit maximization is the primary or main objective of organizations, but under the method of profit maximization the purpose is to increase sales and profit. Less importance is given for consumer interest.

Any queries against product or services is not considered and importance will be less per this method. So at the beginning organizations may be successful in its goal of earning high profits, but the organization will definitely suffer loss in future.

Wealth maximizing means increasing fame, goodwill or reputations by providing importance to consumer preferences and wealth of society. By providing importance to consumer preferences organizations get queries, the need of changes in products that are innovative activities, after sale services, etc. With this important information product or service quality can be increased. Though sales will increase and demand will increase; goodwill also increases.

By this, more of the shareholders, employees will be attracted towards the organization. After that, the lifetime of the company increases also. Wealth maximization is the better goal than profit maximization. How does the goal of maximization of shareholder wealth deal with uncertainty and timing? Because it does not consider the riskiness of returns and it ignores the timing of returns.

The main and primary goal of the business no matter what kind of nature it has, is only profit maximization. There may also be some secondary purposes such as well being of people or offering services to the society but the primary focus is PROFIT. There is nothing wrong, if it is one of the goals. If that happens to be the only goal, employee's morale will get affected. Quality may deteriorate.

Innovations can take a back seat.