Explore BrainMass

Explore BrainMass

    Profit maximisation and wealth maximization

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    Explain why profit maximisation fails to be consistent with wealth maximisation. Include reasons why profit maximsation and/or wealth maximisation or may not be appropriatte corporate goals in your explanation.

    © BrainMass Inc. brainmass.com June 3, 2020, 7:04 pm ad1c9bdddf
    https://brainmass.com/business/capital-budgeting/profit-maximisation-wealth-maximization-85210

    Solution Preview

    Explain why profit maximisation fails to be consistent with wealth maximisation. Include reasons why profit maximsation and/or wealth maximisation or may not be appropriatte corporate goals in your explanation.
    (please explain more clearly)

    Profit maximization should not be the decision criterion of the management. Instead it should be wealth maximization, which is based on the maximization of cash flows. Cash flows are more important to business as it leads to wealth maximization. The profit maximization has certain pitfalls as a criterion, which are as follows:
    • It is Vague
    • It Ignores the Timing of Returns
    • It Ignores Risk

    Moreover, in new business environment profit maximization is regarded as ...

    Solution Summary

    This discusses whether the profit maximisation fails to be consistent with wealth maximisation

    $2.19

    ADVERTISEMENT