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Maximization of shareholder wealth as a goal is superior to profit maximization because?
it is operating cost
Is a shareholder considered an owner of a company?
Yes, a shareholder is considered an owner of a company because they own a portion of the company's stock, which represents ownership in the business.
Is profit maximization an appropriate for a business?
Profit maximization is the ONLY appropriate goal for a business. Even under a so-called "social responsibility" regime, a business only engages in such schemes because it thinks it can increase profits by doing so.
Why shareholder wealth maximization is preferd over other goals?
Shareholder wealth maximization is preferred because it aligns the interests of management with those of the owners, ensuring that decisions are made to enhance the overall value of the company. This focus encourages efficient resource allocation, driving profitability and long-term growth. Additionally, prioritizing shareholder wealth provides clarity in performance measurement and accountability, which can lead to better strategic planning and investment decisions. Ultimately, a strong emphasis on maximizing shareholder value can contribute to broader economic growth and stability.
Can anyone be a shareholder in a business?
no because you are all ready a shareholder.
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
Why do we assume that the goal of a private-sector organisation is to maximise shareholder wealth?
We assume that the goal of a private-sector organization is to maximize shareholder wealth because shareholders are the owners of the company and expect a return on their investment. This focus on profit maximization aligns with the principles of capitalism, where companies are incentivized to operate efficiently and drive growth. Additionally, many management theories, such as agency theory, suggest that executives are motivated to prioritize shareholder interests to ensure job security and performance-based compensation. Ultimately, maximizing shareholder wealth is seen as a fundamental measure of a company's success and sustainability.
Short term profit maximisation is not appropriate objective for a business?
Because business take the long term aspects of the business and for that wealth maximization is more important than anything else.
What is meant by wealth maximization in a corporate finance environment How are corporate securities contingent claims on the firm's value?
Wealth maximization has been accepted by the finance managers, because it overcomes the limitations of profit maximization. Wealth maximization means maximizing the net wealth of the company's share holders. Wealth maximization is possible only when the company pursues policies that would increase the market value of shares of the company.
Why wealth maximization is a function of share price maximization?
because the maximazation is a Behavior that attempts to maximize such performance measures as revenue, profits, contribution margin, or expected net present value
Why are fixed costs are irrelevant in profit maximization decision?
Fixed costs are considered irrelevant in profit maximization decisions because they do not change with the level of production or sales; they remain constant regardless of output. Profit maximization focuses on marginal costs and marginal revenues, which directly impact decision-making. Since fixed costs do not influence the marginal analysis, they do not affect the optimal output level. Thus, decisions should be based on variable costs and revenues that fluctuate with production levels.
Why is that profit maximization may not necessary lead to wealth maximization?
Because as the price of a commodity increases, the purchasing power of consumers reduces. Consumers will then shy away and only few people would be able to pay for the extra. Thus, increase in profit may not necessarily mean maximization of wealth.
