Question

Why profit maximization fails to be consistent with wealth maximization?

Answer 1

bcx profit maximization means.. accepting all the strategies.. which helps in increasing the profits of the business.. on the other hand, wealth maximization refers to increase the wealth of the business or increase in per share of business... so they both are different things in business...

Answer 2

Why profit maximization fails to be consistent with wealth maximization?

Profit maximization is not consistent with wealth maximization because it cannot be used for an effective assessment of the performance of a firm. The maximization of any asset is known as the firm's central net present value and can be used to evaluate their performance on the firm. Since profit maximization is viewed more broadly than profit maximization, profit maximization tends to reduce short term profits.

The profit maximization objective does not factor into the value of money at the time of consideration, so money maximization is better than profit maximization, as the objective is long term. Wealth maximization discounts the cash effect in the present and considers the time value of money. Wealth maximization discounts the required rate of return and it considers uncertainty by considering stakeholders. Therefore profit maximization does not correspond to wealth maximization.

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Unrealised profit on goods sold and included in stock is

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i) Capital Profit

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iii) Fixed Assets

iv) Minority interest

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Economic value added, or residual income is a measurement mainly used to evaluate​

a. revenue centers.

b. cost centers.

c. profit centers.

d. investment centers.