Profit maximization as the goal of the firm is NOT ideal because
A) profits today are less desirable than profits earned in future years.
B) profit maximization does not consider risk.
C) cash flows are more representative of financial strength.
D) profits are only accounting measures.

Question

Quizplus · Accepted Answer

Profit maximization as the goal of the firm is not ideal because it does not consider risk. The goal of any business should be long-term sustainability and growth, not just short-term profit maximization. A company that only focuses on maximizing profits may make decisions that increase profits in the short-term but may not be sustainable in the long-term or may expose the company to unnecessary risks. Therefore, risk management and long-term sustainability should also be considered along with profit maximization.

Profit Maximization as the Goal of the Firm Is NOT