3. Business objectives

Question 1

What are the main business objectives? (7 objectives)

Answer 1

• Profit maximisation
• Sales revenue maximisation
• Business growth/market power
• Business survival in a recession
• Non-profit (social) enterprises
• State-owned businesses
• Satisficing objective

Question 2

Profit maximisation

Answer 2

Occurs when marginal revenue = marginal cost

Question 3

Revenue maximisation

Answer 3

Revenues are maximised at an output level where marginal revenue = zero (MR=0)

Marginal revenue is the change in total revenue from selling an extra unit

Question 4

Sales growth maximisation

Answer 4

Sales maximization focuses on generating the highest possible level of sales within a given period perhaps as part of a wider objective of growing market share and/or building a brand

Question 5

Satisficing objectives

Answer 5

Satisficing involves the owners of a business (shareholders) setting minimum acceptable levels of achievement of revenue and/or operating profits to managers (agents)

Question 6

Stakeholders (8 points)

Answer 6

• Shareholders
• Customers
• Managers
• Employees
• Suppliers
• Creditors
• Government
• Community