Analysis Of Coca Cola Company On Business Accountability And Sustainability

903 WordsJan 27, 20164 Pages
Profit maximation, in essence, is how much surplus revenue the company makes after all expenses are paid. Profit maximation is regarded as the primary objective of a firm, however, is not as general a purpose as that of "maximizing shareholder wealth". Earning a profit in business entails increasing sales, capturing market share, and return on assets, which increases the profitability of a firm. However, its consider a short-term strategy (less than a year); frequently a shortsighted business is concerned with short-term gains; always moving to the next big thing. However, this type of plan does not benefit the shareholder. It may be sufficient to accomplish the goal of earning a profit, although it does support the generation of wealth. Constraints of profit maximation, it disregards the following financial principles, the timing of returns, cash flows, and risk. Moreover, it does not consider the social responsibility. For example, Coca-Cola company emphasis on business accountability and sustainability in their mission statement. One can say that profit maximation aids in the wealth creation of a shareholder 's equity. Maximizing wealth means what is the net present value (NPV) of said investment. The company 's earning per share must increase to accomplish wealth maximization or value of the company, which translate to the value of the stock. This is where the rule of risk and rate of return trade-off is important, an investor will not take on added risk if

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