BBS Second:
Fundamentals of Financial Management
Answer in English and Nepali Medium
What is Profit Maximization Goal? Write its weaknesses.
- Ans: At the beginning of the nineteenth century, the principle of maximizing profits was considered important, but today it is considered useless.
- In other ways, the organization should produce quality goods or services to increase profits.
- In a free economy, goods and services are always profitable.
- Firms that sell good products and services raise the price of goods to generate more profit.
- Due to the market competition of such service providers, the maximum profit reaches the stopping point. And this is the point of profit maximization.
- The purpose of maximizing profits is the process by which the business manages its price and cost structure to achieve the highest possible profit.
- The main objective of the organization is to increase profits.
- The goal of maximizing profit is to conduct other activities with the objective of increasing profit at the center of the organization.
- For this, the market value of the stock is increased.Only profitable projects are selected.
- It is considered normal for an organization to make a reasonable level of profit in order to maintain its existence.
Its weaknesses are as follows:
Increasing profits may seem like a good idea but it is not suitable for modern ideas of entrepreneurship and doing business.
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The purpose of maximizing profits is not clear.
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The time value of the currency has not been taken into consideration.
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It does not generally consider risk and return.
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It focuses on special products to maximize profits that can create waste.
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It is better to produce efficiently than to increase profit.Ignores risks.
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The current business structure is completely different and this structure is not only built on the concept of profit maximization.
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The company’s thinking has also changed over time.
Now, a skilled company is one that can take good care of its stakeholders without any scrutiny about the ethics of its work. The idea of maximizing profits is not self-sufficient in nature and is not designed to target the market.
