Wealth Maximization versus Profit Maximization-The more appropriate [PDF]

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Wealth Maximization versus Profit Maximization-The more appropriate Goal

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Nargis Sultana

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DOI: http://dx.doi.org/10.17722/ijrbt.v7i2.423

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Nargis Sultana Lecturer,Port City International University,Chittagong,Bangladesh Bangladesh

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Financial management pursues two sorts of goals-profit maximization and wealth maximization. One is concerned with earning profits, whereas the other is concerned with adding value. Profit maximization is an inappropriate goal because it’s short term in nature and focus more on what earnings are generated rather than value maximization which comply to shareholders wealth maximization. Wealth maximization overcomes all the limitations that profit maximization possesses. In the short term, profit maximization may pursue such action which might be proved harmful in the long run. On the other hand, wealth maximization might not seem beneficial in the short run, but in the long run-this purpose fulfills the goal of shareholders that is add value. So, whenever there is a comparison, profit maximization is inferior to wealth maximization. The focus has been made on this difference throughout the paper.

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short term; long term; profit; value; wealth; risk Number of downloads: 28

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