Profit maximization does not adequately describe the goal of the firm because
A) profit maximization does not require the consideration of risk.
B) profit maximization ignores the timing of a project's return.
C) maximization of dividend payout ratio is a better description of the goal of the firm.
D) A and B.

Question

Quizplus · Accepted Answer

Profit maximization does not adequately describe the goal of the firm because it does not consider risk or the timing of a project's return. Therefore, both option A (profit maximization does not require the consideration of risk) and option B (profit maximization ignores the timing of a project's return) are correct. Option C (maximization of dividend payout ratio) is not a better description of the goal of the firm because it only represents one aspect of financial management and does not take into account other important factors such as reinvestment opportunities and long-term growth.

Profit Maximization Does Not Adequately Describe the Goal of the Firm