Thursday, April 18, 2019
Profit Maximization An Actual or Theoretical Objective Term Paper
Profit Maximization An Actual or Theoretical butt - Term Paper ExampleIf the results ar observed to have positive impacts on bring ins, only thence that decision is taken into consideration for further implementation. There be number of reasons payable to which the model of remuneration maximization receives attention.it is encouraged because of undeniable and sustainable advantages which it offers to the business. Some of them include Measurement Standard For identifying the performance of a firm, the first motion is asked whether the firm is yielding bread or incurring losses. The higher the profits are earned, the better the performance of the firm. This phenomenon is not merely theoretical but its implications can be seen in the concrete world also. For instance, before investing into any specific firm, the first thing that investors examine is whether the firm is earning profits or not. Investors never invest in any loss making firm and always fetch a portfolio of fir ms that are generating higher profits (Kaneda and Matsui, 2003). Survival of Firm Profits are directly connect with firms survival. A company that is incurring losses is more likely to get separate irrespective of its history or past performance (Dwivedi, 2012). The example of Kodak can be quoted here. Despite of its run into of 131 years, the company filed for bankruptcy in January 2012. The company could not hold its position and began to incur losses due to which it could not survive and ultimately, collapsed. Economic and Social Welfare Indirectly, the objective of profit maximization caters to sparing and loving welfare. In businesses, profits account for allocation of resources and efficient utilization. Making payments and allocating resources such as land, labor, capital, assist in taking care of economic and social welfare (Dwivedi, 2012). A lot of thought has been given to the question of profit maximization by economists. Some large and complex institutions where peo ple of different background achievement together, the purpose is to maximize profits. In actual situation, profit maximization is so common that in both(prenominal) cases, it leads to severe ethical concerns. In the lust of earning higher profits, companies tend to shun ethical boundaries and violate ethics for earning greater returns. Some popular brand such as GAP, Nike, Levis, Converse, have proved to be sinful for ethical violation. Their customer base and headquarters are located in United States whereas their production processes are carried out in Asia therefore they have been criticized for exploitation of workers. They fail to amend the malpractices at production sites of which they are aware but do not take action to correct them. Profit maximization is the first harmonic assumption of economic theory. Although it is undeniably of greatest important however, by itself, it is not an ample criterion for telling business management. In practice, there are number of moti vations and considerations that influence the desire for maximum economic capacity and greatest profit as well as the accompanying assumptions that trigger the firms economic theory. Criticism to Profit Maximization Despite of such importance in theoretical and actual context, profit maximization is still criticized due to number of reasons. It is considered as undesirable on account of the reasons mentioned below. It overlooks the means baffling to earn
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