Asked by: Aitziber Tessmer
asked in category: General Last Updated: 21st January, 2020

What are the disadvantages of profit maximization?

What Are Some Disadvantages of Profit Maximization? Some of the disadvantages that can result from a company becoming overly focused on profit maximization are the ignoring of risk factors, a lessening or loss of transparency and the compromising of ethics and good business practices.

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Also asked, what are the advantages and disadvantages of profit maximization?

Advantages of profit maximization is company can increase their return by boosting up sales or by reducing the cost. Extra profit will add value to the company and give them some competitive advantages if company can produce their goods at cheaper rate than their competitor.

One may also ask, why Profit maximization is not important? It ignores the quality of benefits Profit maximization considers only the size of the total benefits. So, it selects a project with large benefit without considering their degree of certainty and exposes the firm to high-risks. So, the profit maximization cannot be taken is an appropriate decision criterion.

Beside above, what are the drawbacks of profit maximization?

It is because the money received in earlier period may be reinvestable to earn more. 2. The critics of profit maximization objective argue that it ignores the risk associated with stream of cash flow of the project.

What is the importance of profit maximization?

The profit maximization rule is important because it means that your business has maximized its profit which the goal of your business (excluding all the social good your business will perform and all the wonderful workers you will provide with a high standard of living).

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