Profit maximization verses wealth maximization
?Download as PPTX, PDF?
11 likes?34,692 views
The document discusses the differences between profit maximization and wealth maximization as financial goals. Profit maximization aims to maximize the income of a firm through fully utilizing resources and working efficiently, guided by price signals from the market. Wealth maximization considers the net present value of actions for shareholders over time while accounting for risk, measuring benefits in terms of cash flow rather than simple profits. The overall financial goal is to increase the economic welfare of owners through either maximizing profit or shareholders' wealth.
Profit maximization verses wealth maximization
- 1. PROFIT MAXIMIZATION VERSES WEALTH MAXIMIZATION PRESENTED BY: SINDHU KUMARI BSC (FMRM) 4thSem FINANCIAL GOAL:
- 2. FINANCIAL GOAL ? Is to increase the owner’s economic welfare. ? Economic welfare refer to as maximization of profit or maximization of shareholders wealth. ? Maximizing the income of the firm and minimizing the expenditure. ? It guides in financial decision making.
- 3. PROFIT MAXIMIZATION ?Maximizes the rupee income of the firm ?The resource must be fully utilized ?The firm must work in the interest of the society as efficiently as possible ?Price system (INDICATES,DIRECTS MANAGERIAL EFFORTS,ALLOCATION) ?Higher profit of the firm ?Competition leads to equilibrium price
- 4. WEALTH MAXIMIZATION ? Maximizing the net present value of a course of action to shareholders(profit). ? It considers both time & risk ? Benefits are measured in terms of cash flow
- 6. THANK YOU!