0
What are the situations when the profit maximization inconsistent with firm value maximization?
Wiki User
∙ 11y ago
It is fairly easy to make short-term profits at the expense of long-term value creation. Milk the company. Some examples:
- Make lots of short term sales by lowering prices, thus driving down overall industry profitability which will lower long-term profit.
-Create a lower quality product then the ones that have built up the value of your company brand. People will buy the new product seeking quality and be disappointed. This devalues the brand and brand value may be critical to long-term success.
-Cut out the product development department. This spikes profit and destroys the future. Same with marketing.
-Sell off assets for big one-time gains.
-Don't invest in people. Push them hard. Don't reward them. You will save money, make big profits, and then collapse.
Wiki User
∙ 11y ago
Add your answer:
Earn +20 pts
What is Three basic reasons is profit maximization inconsistent with wealth maximization?
Profit maximization is a narrow view which accounts for only the difference between sales and costs Wealth Maximization is broader and more philosophical in approach. Wealth maximisation includes not exhaustively culture , synergy, value, potential and wealth
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.
Profit maximization vsealth maximization in financial management of an organization?
Profit maximization is also about increasing the EPS (earning per share) of the shareholders and to maximise the net present worth. Main objective of co is profit maximization EPS: net profit/ no of shares outstanding. Wealth maximization is anything having value. Anything which can be expressed in money value or economic value which is considered as wealth. Baisc objective of a co is wealth maximization. How to increase the wealth: By producing a quality product at a competitive rate. By giving product at reasonable price. Good after sales service. this all things leads to increase in co's wealth.
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.
Explain wealth maximization and value maximization objectives of financial management?
Wealth maximization of financial management focuses on increasing fixed and current assets while value maximization focuses to strengthen intangible assets.
What is Three basic reasons is profit maximization inconsistent with wealth maximization?
Profit maximization is a narrow view which accounts for only the difference between sales and costs Wealth Maximization is broader and more philosophical in approach. Wealth maximisation includes not exhaustively culture , synergy, value, potential and wealth
What is the difference between profit maximization and value maximization?
discount rate
Differentiate between value for money and profit maximization concept in corporate governance?
differentiate between value for money and profit maximization
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.
What is the difference between profit maximization and wealth maximization?
Shareholder wealth (more commonly referred to as shareholder value) is talking about the value of the company generally expressed in the value of the stock. Profit maximization refers to how much dollar profit the company makes.
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 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.
Profit maximization vsealth maximization in financial management of an organization?
Profit maximization is also about increasing the EPS (earning per share) of the shareholders and to maximise the net present worth. Main objective of co is profit maximization EPS: net profit/ no of shares outstanding. Wealth maximization is anything having value. Anything which can be expressed in money value or economic value which is considered as wealth. Baisc objective of a co is wealth maximization. How to increase the wealth: By producing a quality product at a competitive rate. By giving product at reasonable price. Good after sales service. this all things leads to increase in co's wealth.
Can there be difference between profit maximization and shareholders wealth maximization?
Profit maximization is short term as compare to share holder's wealth maximization, Managers should focus on Share holder's wealth maximization because its what they are hired for. also there are sevseal reasons such as.... 1) the share holders wealth is be considered.. 2)profit maximization doesnt say which type of profit it should maximize-short term or long term 3)profit maximization ignores the social values but only aims at earning maximum profit. 4)wealth maximization also considers improving the goodwill of the organization
Is Profit maximization the primary goal of any business enterprise?
Yes, profit maximization is the primary goal of a business. If a business doesn't maximize profits the Board of Directors can request that the CEO leave.
What is the primary objective of the firm?
Profit maximization. Also called maximizing shareholder wealth.
