The goals in maximizing wealth in a business essay
Maximizing profits is a superior goal compared to maximizing sales. Although increasing profits are directly related to growing revenues. General statements such as “the higher the revenue, the greater the profit. However, a company can use the goal of maximizing shareholder wealth to eliminate the disadvantages associated with the goal of profit maximization. The use of shareholder wealth goal maximization in a company leads to maximization of the company's entire equity financing. This means that it not only increases net income, but wealth maximization is a modern business concept where organizations evaluate their capabilities, shortcomings and best possible outcomes to maximize the wealth component of their shareholders. This is usually considered the goal of modern businesses Roe, 2001. But wealth maximization is not essential. He proposes a new definition of ethical behavior in business that is less tied to highly personal values: respect for implicit contracts. Once we embrace this definition, maximizing shareholder value may well be an ethical responsibility. Vermaelen believes that a company should be viewed as a set of contracts between. In conclusion, maximizing shareholder wealth is a superior goal that a company is bound to fulfill in order to survive. If companies do not operate with the goal of maximizing shareholder wealth in mind, shareholders will have little incentive to accept the risk necessary for a company to thrive. Holders, that is, consumers. Profit-maximizing CSR. also allows us to reconcile the conflicting empirical evidence of the impact of CSR on financial performance. McWilliams amp Siegel, 1997. The importance of maximizing shareholder wealth in business. In the modern financial world, it has been proven that maximizing shareholder wealth is the superior goal of a corporation and that shareholders are the remaining claimants. Therefore, maximizing shareholder returns usually implies that companies must also satisfy stakeholders such as customers and employees. Businesses must learn that even though they achieve both Profit maximization and social responsibility are costly and result in a wide range of benefits for both business and society. Given the many benefits that come with social responsibility, the primary goal of corporations should not be to increase shareholder wealth. This objective of maximizing shareholder wealth is justified on the grounds that it maximizes social welfare. In this article, the first of a two-part series, we argue that while this model of shareholder primacy may have been appropriate in an earlier era, it is no longer so given our current state of economic and social affairs. Theoretically, sales maximization is achieved when a company sells as much of a product or service as possible without making a loss, meaning that the average revenue from a product or service is the same as the average cost of producing it. This is often achieved by strategically lowering prices. Here is a numerical example of selling. In conclusion, maximizing shareholder wealth is a superior goal that a company must mandatorily fulfill to survive. If companies do not operate with the goal of maximizing the. ,,