Profit and wealth Maximization are the terms which is used in the finance. Every organization’s goal is to increase the profit and the wealth of the organization. Profit maximization as the name indicates is the maximization of the profits of the company. There are many aspects which are responsible for the profit maximization. These aspects are increased in the sale. Increase output with the low input. Wealth maximization is the increase in the share and market value of the company. It also indicates the boost up the worth of the entity.
Financial management is very essential for the growth of the business. If someone has financial management his business grows very fast. Profit and wealth Maximization comes under the financial management. Both profit and wealth Maximization are different from each other. In this article we will discuss in detail about the profit and the wealth Maximization. We will also discuss the difference between the profit and the wealth Maximization. There are many terms and aspects that are related to profit and wealth maximization. We will also discuss those terms and the aspects in this article.
Table of Contents
Profit maximization vs Wealth Maximization
| Sr. No. | Profit Maximization | Wealth Maximization |
| 1 | Based on the increase of the sales which leads to more profit. | Is the increase of stock prices and market value. |
| 2 | Focused on short term goals. | Focused on long term goals.
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| 3 | No time value of money | Time value money |
| 4 | Ignores the uncertainty and risk. | Risk and uncertainty is considered |
| 5 | Very necessary for business growth | Accelerates the business growth which leads to increase in the stock price of the company.
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Profit Maximization
The capacity of a business to Produce maximum production from the minimum resources. This leads to increased profit. The main motive of any organization is to earn profit. Profit is the main factor of the business which helps businesses to stand for the years. If profit decreases, the capital of the business also decreases.
Profit is calculated as total= revenue – total cost of the production. Profit maximization is the main objective of the business. It is the responsibility of the finance officer to take the suitable decision for the profit maximization.
Wealth maximization
The capacity of the business to increase the market value and stock price is known as wealth Maximization. Market value of the business depends upon the sale, goodwill, quality of products and services.
Wealth maximization is the main goal of the company. This is done with the help of evaluating the performance of the business. For the wealth Maximization the fundamentals of the company should be strong and clear. When the firm becomes old in the market and investors increase the trust in the firm, in this case they buy the shares of the company. With the increase in the demand of the share the price of the share rises and in this manner wealth of the organization increases.
Main Differencee Between Maximization and Wealth Maximization.
- Profit maximization is based on the increase of the sales which leads to more profit. Wealth Maximization is the increase of stock prices and market value.
- Profit maximization is focused on short term goals. Wealth Maximization is focused on long term goals.
- No time value of money in profit maximization. Time value money is considered in the wealth Maximization.
- Profit maximization ignores the uncertainty and risk. Risk and uncertainty is considered by Wealth Maximization.
- Profit maximization is very necessary for business growth. While wealth Maximization accelerates the business growth which leads to increase in the stock price of the company.
Conclusion
Both profit and wealth Maximization is very important for the company’s growth. Profit maximization helps in the survival of the company. Wealth Maximization helps to increase the value of the company in the market. With the increase in the value of the company, the sale and profit of the company.
This is all about profit and wealth Maximization. Hope this information will help you. If you have any doubts please feel free to comment on us. For more interesting topics please go through our website.
What is Profit Maximization
The capacity of a business to Produce maximum production from the minimum resources. This leads to increased profit. The main motive of any organization is to earn profit.
What is wealth maximization
The capacity of the business to increase the market value and stock price is known as wealth Maximization. Market value of the business depends upon the sale, goodwill, quality of products and services.
Main Differencee Between Maximization and Wealth Maximization.
Profit maximization is focused on short term goals. Wealth Maximization is focused on long term goals.
No time value of money in profit maximization. Time value money is considered in the wealth Maximization.
Profit maximization ignores the uncertainty and risk. Risk and uncertainty is considered by Wealth Maximization