Business Objectives Profit Maximisation

It is the traditional approach and the primary objective of financial management.

Business objectives profit maximisation. It depends on the industry in question. The objectives of the company are clearly defined which are profit maximization sales maximization cost minimization growth of the company the excellence of a product maintenance of good public relations the welfare of employees etc. Its main aim is to earn profit.

The basis of the difference between the objectives of the neo classical firm and the modern corporation arises from the fact that the profit maximisation objective relates to the entrepreneurial behaviour while modern corporations are motivated by different objectives because of the separate roles of shareholders and managers. Out of the objective mentioned above the most important objective is profit maximization. Improving staff loyalty and motivation.

Profit maximisation occurs at q1 p1 where mr mc revenue maximisation will be at q2 p2 mr 0 sales maximisation whilst making normal profit will be q4 p4. Under profit maximization objective business firms attempt to adopt those investment projects which yields larger profits and drop all other unprofitable activities. So it shows the entire position of the business concern.

For some industries profit maximisation is necessary to finance investment and development. Profit maximization refers to the maximization of dollar income of the firm. Profit maximisation mc mr profit maximization occurs at the point where marginal cost is equal to marginal revenue.

One of the main reasons why firms may want to operate at the profit maximization point is in order to keep shareholders happy. This may involve better management of raw materials and supplies e g. Raise profile of business.

A successful marketing strategy to raise brand awareness and increase sales. And hence profit maximization objectives help to reduce the risk of the business. Business objectives including profit maximisation total profit is maximised at an output level when marginal revenue marginal cost consider the example in the table.