The main purpose of corporations was to generate profits, in addition to maximizing shareholders. Accounting essay
Note that this is not the same as maximizing profit, a short-term, accounting performance measure. Shareholder value is the present value of expected cash flows from now to infinity, and is clearly not a short-term concept. In an efficient market, the market value of equity should equal the shareholder value. Profit maximization is the main goal of any business and therefore also an objective of financial management. In financial management, it represents the process or approach by which the answer is discussed below. Reasons why profit maximization cannot be the ultimate goal of the organization are given below. 1 There has been a debate about the concept of profit. A. In general, profit maximization is considered an important goal for a business for several reasons. 1. When profits are maximized, there are high revenues that can be used for business expansion. And business expansions for owners mean greater potential for income generation, and for society this could increase. Wealth maximization is one of the most important objectives of a business. An organization must maximize its wealth to survive and grow. Therefore, it is important to make intelligent decisions regarding shareholder wealth maximization to help it prosper in the long term. In this article we briefly discuss a financial concept. Business is about increasing or maximizing shareholder profits because the company is owned by the shareholders. According to shareholder theory, maximization is the sole purpose of management. This article is an attempt to criticize Milton Friedman's article entitled, “A Friedman Doctrine The Social Responsibility of Business is to Increase Profits,” published in New York. Value creation is inclusive. For companies everywhere, creating long-term shareholder value also requires satisfying other stakeholders. You cannot create long-term value by ignoring the needs of your customers, suppliers and employees. Investing in sustainable growth should, and often does, result in stronger economies. 4. Upsell, Cross-sell, Resell. It is expensive to acquire new customers. Instead, smart companies know that one of the best ways to increase sales is to introduce current customers to complementary products through upselling, cross-selling and reselling. Higher efficiency. The most obvious benefit of a wealth maximization goal is that you make money for all the owners of the business. If you start a business alone or together with other investors, you naturally want to make as much money as possible. If all your business decisions are connected with this goal in mind, you can make enough money. 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 higher the profit' proves to be incorrect when the company generates additional revenue at a loss or with a lower profit margin.