Principles of profit maximisation

Where the pros come to learn


  • Sales Revenue Maximisation:-

    1. It occurs when firms makes as much sales as possible.
    2. For this quantity produced and sold can be increased but here firms have to consider their costs also.
    3. So, sales revenue maximization can help a company to increase its profits.
  • Growth:-

    1. The managers,directors and chief executive may have growth of firm as a key objective and hence they may try to maximize their sales.
    2. They also need to plan for expansion of their business for retaining the growth in the market.
  • Profit Maximisation:-

    1. According to traditional theories firm seek to maximize profit.
    2. It means that they try to earn largest profit possible over a period of time.
    3. Increasing the size of firm may involve reducing number of competitors(by merging) or increasing the scale of production(due to expansion) may reduce average cost.
    4. The outcomes would increase profit.
  • Profit Satisfaction:-

    1. Profit satisfaction is satisfying some profit to achieve other goals.
    2. For eg:- The managers,directors and chief executive of limited companies need to keep their shareholders happy.Acheiving enough profits to pay out high enough dividends to keep them happy is called profit satisfaction.
  • Social Responsibilty:-

    1. Firms have to show greater concern about environment and social effects of their action.
    2. They have to clean up their production process and ensure that child labour is not practiced.