Profit maximization does not always lead to wealth maximization because
A) it does not consider the riskiness of the cash flows.
B) it does not consider the timing of the cash flows.
C) it does not consider the size of the cash flows.
D) two of the above are correct.
E) all of the above are correct

Question

Quizplus · Accepted Answer

Profit maximization focuses solely on maximizing current profits, but it does not necessarily lead to wealth maximization in the long run. Wealth maximization takes into consideration the riskiness and timing of the cash flows as well as the size of the cash flows. Therefore, choices A and B are correct while C is not entirely accurate since the size of cash flows can be important, but it is not the only consideration for wealth maximization.

Profit Maximization Does Not Always Lead to Wealth Maximization Because