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Q. Criticism of Wealth Maximization?
i) The objective of wealth maximization is not, necessarily, socially desirable.
ii) There is some controversy whether the objective of maximization of wealth is of the firm orStockholders. If wealth of firm were maximized, it would be benefiting the interests of debenture holders and preference shareholders too.
iii) In corporate sector, ownership and management are separate unlike in a sole proprietorship. Management acts as the agents of real owners i.e. shareholders. However, there is always a possibility of conflict of interest between, the shareholders' interests and managerial interests. The managers may act to maximize their managerial utility but not the wealth of stockholders of the firm. A particular decision may be taken to exhibit their managerial utility and that decision may not be in the exclusive interests of the firm. Many a time, individuals place their personal preferences and selfish interests, ahead of the institutional interests.
lso from the auditor's report, they have reported that the company has used funds raised on short-term basis for long-term investment. The company has purchased certain fixed asses
Capital cost of product a is ? 5 crores and initial capital cost of product b is ? 3 crores. Life of product a is 30 years and life of product b is 10 years . The difference in ini
a) Ethics can be a rather prejudiced matter; whether it is ethical to market products directly at children depends on several factors: The age of the children being targeted
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