What is the profit maximization model?

Answer 1

Making decision based on profit maximsation focus on accounting income and may be manipulated as it tends to focus on the short term, it can therefore be regarded as too simplistic as it does not consider cash flows, is biased towards short run returns and ignores the relative riskiness of the alternative.

Answer 2

Maximization of profit is maximizing the profit to cost ratio. if you can sell something for a dollar that costs a quarter to make you have a 75 cents profit but if the same item cost 50 cents you would only have a quarter profit. maximization of profit takes into accout sullpy and demand. lets say 100 people want your product. if it costs a dollar only 80 people would buy it which would give you a 60 dollar profit. but if it you sold it at 1.50 only 40 people would buy it and you would have a 50 dollar profit. and if you sold it at 50 cents all 100 would buy it but you would only make a 25 dollar profit. so the mazimization of profit would be to sell at 1 dollar.

Answer 3

The profit maximization principle stresses on the fact that the motive of business firms to maximize profit is solely justified as being a method of maximizing the income of their shareholders. Firms may maximize profit by maximizing sales, stock price, market share or cash flow. In order to achieve maximum profit the firm needs to find out the point where the difference between total revenue and total cost is the highest.

The rules that apply for profit maximization are: i. increase output as long as marginal profit increases ii. profit will increase as long as marginal revenue (MR) > marginal cost (MC) iii. profit will decline if MR < MC iv. summing up (ii) and (iii), profit is maximized when MR = MC

For a clearer view and calculations and graphical representations of the goal of profit maximization go to the following link:

http://www.Google.com.bd/search?hl=en&client=firefox-a&rls=org.mozilla:en-US:official&hs=Kr7&q=profit%2Bmaximization%2Bprinciple&start=10&sa=N

Answer 4

It's the process of finding how much to sell it for to make the most money if your profit is 5$ and you sell 100 compared to 7 but you only sell 90 and 10 and you sell 45. you make the most money selling the 90 at 7$

Answer 5

In most cases we find that business owners treat profit as what is left over after expenses are deducted from sales. There are no budgets or profit forecasting. There is no formula for predetermined profit measured against any level of sales.

Start by studying the profit history of your business and then calculate what the profit potential of the business should be if it were to operate at optimum levels.

Pre-Planning-profits as a line item of expense and then engineer the business around the "maximum profit" that can be gotten from the business. Departmentally will also be a great step in the right direction.

This can be the only way to ensure "Maximization of Profits" otherwise profit will always go up and down and never maximized.

Answer 6

Trying to make the greatest amount of profit possible.

Answer 7

Profit Maximization model means a scenario where the busniess is runned by the motive of profit making and keep the cost low.