Profit Maximization / Maximization of Shareholder Wealth Essay

The primary name and address of financial oversight regarding batchs should be to maximize lineholder wealth on the whole. If management was to sole(prenominal) concentrate on profit maximization, they would much than seeming run their corporations into the ground. The very(prenominal) existence and concept of a corporation is beneficial to business in numerous ways. First and foremost, corporate status helps release management from thinkable enourmous financial liability issues. Second, shareholders are the key of checks and balances in a corporation. commission is wise to heed the concerns and needs of shareholders.The book uses a good grammatical case when referring to coalitions. A merger in the future of a corporation could be viewed as a decreed run into bringing much wealth, to a greater extent talent and/or a larger consumer base. However, management could see the move as a negative one as they would have to peradventure change roles and give up certain pri vledges they are accustomed to. Although the merger may bring the corporation positive growth, management could be averse(p) to make the merge. This could be the case in a main goal of personal profit maximization. Without the merge, the company could lose steam and competitiveness and shareholder could lose in the end.It is important to note that shareholders may be employees of the trustworthy who would become more than loyal and efficient when they are rewarded financially. Shareholders financially endue in the corporation and if rewarded with good returns, will continue to invest generously. The more shareholders find value in a given corporation, the more apparent they are to financially invest, which in turn gives the corporation more positive funds to grow business.Also, social responsibility may play a part in the maximization of shareholder wealth. If the public perceives a corporation as being socially responsible they may become more loyal clients. Knowing that a loc al corporation has taken travel toward pollution control would make me much more likely concerned in consuming their goods as I would feel that I was aiding my community. more business from loyal consumers maximizes profits as well as shareholder wealth. Although the above example of pollution control maycost more for the corporation than not deploying the controls, it would create a more loyal customer base. I believe that a loyal customer base is more beneficial to have than a fly-by-night customer.As shareholders are rewarded financially and P/E grows, corporations appear to be winning investments on the stock market. The more value customers perceive in a business, the more likely they are to financially support the institution.