Profit maximization - objectives of business entity, Finance Basics

Profit maximization - Objectives of Business Entity

Conventionally, this was considered to be the main goal of the firm. Profit maximization refers to getting the highest possible profits throughout the year.  This would be achieved via either increasing sales revenue or via reducing expenses.  Notice as:

Profit = Revenue - Expenses

The sales revenue can be increased through either volume selling price or the increasing the sales. However it should be differentiated, such maximizing sales revenue may on the same time effect to increasing the firm's expenses. However the pricing mechanism will, assist the firm to determine such goods and services to give so as to maximize profits of the firm.

The profit maximization goal has been criticized since of the following like:

  • It avoids time value of money
  • It avoiders uncertainties and risk
  • It is vague
  • It ignores another participant in the firm quite than shareholders.
Posted Date: 1/29/2013 1:15:13 AM | Location : United States







Related Discussions:- Profit maximization - objectives of business entity, Assignment Help, Ask Question on Profit maximization - objectives of business entity, Get Answer, Expert's Help, Profit maximization - objectives of business entity Discussions

Write discussion on Profit maximization - objectives of business entity
Your posts are moderated
Related Questions
Some of the policies decided by the proprietor are: 1) Time of operating the business 2) Promotion through advertising or special offers 3) Dealing with suppliers and cus

Book Value and Market to book value per share Book value per share (BVPS)  = Net worth Equity/No. of ordinary shares It is called also liquidity ratio that show

Collection Policy The firm's collection policy may affect also our study.  The higher the cost of collecting accounts obtainable the lower the bad debt losses.  Therefore the

Price Earnings Ratio Price earnings (P/E) or ratio =  Market price per share (MPS)/Earnings per share                                     OR    = Market value of equity /Ea

Contracting Cost - Agency Costs These are costs acquired in devising the contract between the shareholders and managers. The contract is drawn to ensure management act in t

Classification of New Issue Market New market can be classified as: (i) A market where firms go to public for the first time through initial public offering (IPO). (ii

Question: a) An oil well now produces 75000 barrels per year. The well will produce for 21 years more, but production will decline by 3.7% per year. Oil prices however, will in

For each of the financial statement ratios listed below calculate the ratio for the current year and for the prior year. (Note that in most textbooks, some of the ratios call for a

Terms used in Capital Market Authority 1. ACCOUNTS fourteen (14) days durations into that the stock exchange trading calendar is divided. 2. ACCOUNTS DAY - Sixth or sev

Assume IBM pays out all earnings as dividends. Today is t = 0 and IBM just paid a $2 dividend on $2 of earnings. The market expects dividends will grow each year by 5% until t = 4