Why is profit maximization, by itself, an inappropriate goal? What is meant the goal of maximization of shareholders wealth?
Traditionally, finance teaches that managers should act according to the interest of the firm’s owners or its stockholders. There are different viewpoints in this case. Some agree with pure profit maximization and some not. I personally think here the goal is the main keyword .I mean what you want determines what you have to do. What should you as a financial manager try to maximize? Some people believe that the manager’s main goal always should be to try to maximize profits . To do it, they should take only those actions that expected to increase revenues more than costs. It means maximizing in EPS ( E arning P er S hare). It seems a reasonable objective but as a goal suffers from several flows: First of all, figures for EPS are always historical so reflect past performance rather than what is happening now or what will happen in the future. If you as a manager seek only to maximize profits in a limited period, you may ignore the timing of those profits. Large profits that...