Principles of profit maximisation
OBJECTIVES OF FIRM
Sales Revenue Maximisation:-
- It occurs when firms makes as much sales as possible.
- For this quantity produced and sold can be increased but here firms have to consider their costs also.
- So, sales revenue maximization can help a company to increase its profits.
- The managers,directors and chief executive may have growth of firm as a key objective and hence they may try to maximize their sales.
- They also need to plan for expansion of their business for retaining the growth in the market.
- According to traditional theories firm seek to maximize profit.
- It means that they try to earn largest profit possible over a period of time.
- 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.
- The outcomes would increase profit.
- Profit satisfaction is satisfying some profit to achieve other goals.
- 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.
- Firms have to show greater concern about environment and social effects of their action.
- They have to clean up their production process and ensure that child labour is not practiced.