PPT Presentation Number 1 Topic: The Sole Reason for a Company's Existence is to Make a Profit According to Moyer, McGuigan, Rao, and Kretlow (2012, p.6), "shareholder wealth maximization goal states that management should seek to maximize the present value of the expected future returns to the owners"¦" Shareholders are the owners of a business. They assume the risks of investing in a business and for this reason; the top executives of the firm should put their interests first by maximizing profits. From this perspective therefore, the sole reason for a company's existence is to rake in good returns for shareholders, i.e. make a profit. Next, it is also important to note that to continue in its existence, a business must be profitable. In the words of Gitman and McDaniel (2008, p.432), "cash is the lifeblood of business. Without it, a firm could not operate." To keep their doors open, businesses must meet their expenses and cost of doing businesses. Expenses in this case include but they are not limited to payment of wages, maintenance of motor vehicles and other equipment, etc. Further, to insure themselves against any future eventualities, businesses must also set aside some cash for a "rainy day," i.e. to cater for sudden price hikes. A business would cease to operate if it lost its ability to be profitable. Thus in the final analysis, the sole reason for a company's existence is to make a profit. Businesses also have a responsibility to ensure that the goods they
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Why is stock value maximization superior to profit maximization as a goal for management? Stock value maximization is pretty significant to a company since it can be told about the company such as an reputation. Companies cannot exist by themselves. They do need a lot of money or
Profit maximisation is when firms maximise their profits through sales and increasing the price of products. Profit maximisation occurs when total sale revenue is furthest above total cost which is when MR= MC. Firms are usually controlled by the managers, in order for managers to keep its position its must gain enough or maximise the firms’ profits, so it can satisfy the shareholders. However managers may want to take a different approach rather than maximising the firms’ profits. Managers may want to maximise managerial objectives such as maximising its sales rather than profits. However although they are taking a different approach, they still must gain enough profits to satisfy the firms’ shareholders in order to avoid losing their
As a result, holding cash would be essential component of the firm strategy. To develop new products, buy new equipment or expand geographically, firm has to spend money on marketing research, product design, prototype development and so on. Moreover, if a recession hits and the economy start to slow down,
The shareholder value or financial perspective includes strategic objectives in areas such as market share, revenues and costs, profitability, and
This will be an over view of ethics as it relates to business in our society. Concepts from Philosophy will seek to describe the correlation between actions that are classified as morally right or ethical in our dealings with each other as human beings. Clear and concise examples will be given as well as ways in which to improve upon business ethics.
The management of cash is essential to the survival of any organization. Managing an organization’s financial operation requires knowledge of the economy and ways to maximize revenue. For any organization to operate on a daily basis adequate cash flow is required. Without cash management the organization will be unable to function because there is no cash readily available in case of inconsistencies in the market. Cash is also needed to keep the cycle of the company’s operations going.
Most companies are profit oriented. Companies survive and live on profit. Even governmental institutions, NGO's and NPO's are profit oriented, what they do with profit is different though. Saying this means that companies seek always to be at a position where profit is maximized. As we know by now this happens when MC=MR but this is an always changing point as supply and demand are dynamic, effectively meaning that if firms get it right once they can't just do the same eternally, they still need to adapt to every market factor as a new change is a new reality all together that needs to be studied and addressed. All
One often stumbles upon such statements while reading about shareholders value or maximization of shareholders wealth. This is also a typical answer to questions such as “what is the best and primary objective of a company in a competitive market”. But should it be the only and most important objective in a firm? Must it be fulfilled first and foremost, or is there the possibility of generating more wealth for company, shareholders and stakeholders with other, different approaches? It has