Why is profit maximisation viewed as the most important goal of a firm? (1 Viewer)

[FancyPenguin]

All I've gotten so far is that many businesses will aim to achieve profit maximisation to make the owners of the company (shareholders) happy and that trying to achieve this goal is the main influence on the decisions and behaviour of a company.

would anyone know other reasons why profit maximisation is the most important goal of a firm

 

[Trebla]

You need profits to be able to continue running the company and potentially expand it so it is in their best interests to maximise that profit.

 

[piethepker]

Essentially because entrepreneurs start a business because they want money.

Thus, Profit is the most important goal of a firm, as it satisfies the original goal of starting the business

 

[Ekman]

Essentially because entrepreneurs start a business because they want money.

Thus, Profit is the most important goal of a firm, as it satisfies the original goal of starting the business

Just to add a bit on to there, majority of the time entrepreneurs take out loans from banks in order to start a business. Thus they try to maximise their profits in order to repay their loans quickly, as the interest accumulates. You will learn later on as to how profit maximisations affects the future of a firm.

 

[Ethaw]

Essentially because entrepreneurs start a business because they want money.

Thus, Profit is the most important goal of a firm, as it satisfies the original goal of starting the business

Not necessarily, some people start businesses because they have a vision or seek to innovate (or other motives along these lines), it isn't always such shallow things, ultimately they need profit to achieve these other goals but I wouldn't say it is their "original goal" or WHY they start a business.

 

[mreditor16]

Also, to add onto the points made above, profits made can be used to invest back into the firm and develop its capacity to produce more profits in the future.