Profit maximization is basically a single-period or, at the most, a short-term goal.
Maximisation versus Shareholder Wealth Maximization
maximization is basically a single-period or, at the most, a short-term goal.
It is usually interpreted to mean the maximization of profits within a given
period of time. A firm may maximize its short-term profits at the expense of
its long-term profitability and still realize this goal. In contrast,
shareholder wealth maximization is a
long-term goal shareholders are interested in future as well as present
profits. Wealth maximization is generally preferred because it considers (1)
wealth for the long term, (2) risk or uncertainty. (3) the timing of returns,
and (4) the “shareholders’ return. The following table provides a summary of
the advantages and disadvantages of these two often conflicting goals
Tags : Financial Management - Finance – An Introduction
Last 30 days 2027 views