Business Objectives

Question 1

Benefits of profit maximisation

Answer 1

• Higher salaries for managers and workers
• Higher dividends for shareholders
• Encourages firm to be efficient and to keep looking at cutting costs.
• Higher profit enables more resources to invest in future projects and safeguardsthe long term success of the firm

Question 2

Benefits of sales maximisation

Answer 2

Firms may seek to increase their market share, even if it means less profit. This could involve
•Sales revenue maximisation -maximising total revenue (P*Q)
•Sales volume maximisation - selling as many units as possible -probably selling goods as cheap as possible without making a loss.

Question 3

Why maximise sales?

Answer 3

increased market share increases their monopoly power and may enable them to put up prices and make their profit in the long run

Question 4

Factors that influence choice of objectives?

Answer 4

• Aims of owners, some owners may be motivated by profit. Others may be more concerned with social welfare.
• Public opinion: Adverse publicity can encourage firms to take social welfare more seriously. This may encourage multinationals to promote schemes for the betterment of LEDCs.