{"id":34535,"date":"2015-06-17T11:51:11","date_gmt":"2015-06-17T11:51:11","guid":{"rendered":"http:\/\/vskills.in\/certification\/blog\/?p=34535"},"modified":"2024-04-03T13:18:15","modified_gmt":"2024-04-03T07:48:15","slug":"maximising-profit","status":"publish","type":"post","link":"https:\/\/www.vskills.in\/certification\/blog\/maximising-profit\/","title":{"rendered":"Maximising Profit"},"content":{"rendered":"

\"Maximising<\/a><\/p>\n

Profit here would normally be interpreted as accounting profit, This objective arises from the fact that the shareholders are\u00a0the owners of the business and, as such, both the exercisers of ultimate control and the
\nbeneficiaries of profits. It is therefore argued that the shareholders will cause managers to pursue policies that would be expected to result in the maximum possible\u00a0profit. This analysis is acceptable up to a point, but maximising profit could easily be\u00a0sub-optimal to the shareholders. It may be possible to increase profit by expanding the
\nbusiness\u2019s scale of operations. If the increase merely results from the raising of additional external finance, it might mean that profit per share could actually decrease,
\nleaving the shareholders worse off.
\nPharmaceutical products manufacturers typically spend vast amounts of money on\u00a0developing and testing new products. It is in the nature of the industry that the time\u00a0taken to bring a new drug to the market can easily be ten years. A particular business\u00a0that stopped spending money on research and development would enhance current
\nprofit because costs would be cut but revenues arising from continuing to sell drugs\u00a0developed in past years would continue for the time being. Thus current profits would\u00a0be buoyant but the business would face a bleak future since there would be no new\u00a0drugs to replace the old ones.
\nIt is probably open to most businesses to increase their profits without additional\u00a0investment if they are prepared to take additional risks. For example, cost cutting on\u00a0the control of the quality of the business\u2019s output could lead to increased profits, at\u00a0least in the short term. In the longer term, placing substandard products on the market could lead to the loss of future sales and profits.
\nClearly, increasing profitability through greater efficiency is a desirable goal from\u00a0the shareholders\u2019 point of view. However, maximisation of profit is far too broad a\u00a0definition of what is likely to be beneficial to shareholders.<\/p>\n

Click here for government certification in Accounting, Banking & Finance<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Profit here would normally be interpreted as accounting profit, This objective arises from the fact that the shareholders are\u00a0the owners of the business and, as such, both the exercisers of ultimate control and the beneficiaries of profits. It is therefore argued that the shareholders will cause managers to pursue policies that would be expected to…<\/p>\n","protected":false},"author":625,"featured_media":34583,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_joinchat":[],"footnotes":""},"categories":[1519],"tags":[4480,4479,4478,2014],"class_list":["post-34535","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-accounting-banking-and-finance","tag-bleak-future","tag-current-profits","tag-maximising-profit","tag-shareholders"],"acf":[],"yoast_head":"\nMaximising Profit - Vskills Blog<\/title>\n<meta name=\"description\" content=\"What do we mean by Maximising Profit of shareholders ? 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