1. Wealth maximization process?
2. Maximization of wealth of shareholder?
3. The profit maximization of shareholders?
4. What is profit maximization in business?
5. Difference between profit and shareholder?
6. Goal of maximization of shareholder wealth?
7. Wealth maximization or profit maximization?
From an accounting perspective, profit is the difference between the price and cost of a product or a service. From an economic perspective, profits are the gains derived from an investment when the total returns exceed the invested capital. Profits are generally measured over a period of time.
Types of Profits
Profits can be of several types:
• Gross profits: This profit is the difference between the sales price and the direct costs incurred in manufacturing a product. This type of profit helps a business decide its pricing policies and the use of materials. • Net profits: Net profits can be calculated by subtracting overall expenses incurred for the normal running of a business from the gross profit. • Net profit after interest and taxation: The profit after the deduction of taxes to the government and interest payments on loans is called net profit after interest and taxation. • Retained profit: This is the profit that is left over after a firm pays off dividends to its shareholders. • Economic profit: This profit is realized from a product when revenues generated from it are higher than the total opportunity cost of its input materials. • Accounting profit: This is the difference between revenues and accounting costs paid for inputs. • Normal profits: This is the opportunity cost of labor and capital.
How Shareholders' Wealth Grows.
Shareholders benefit financially from their investment in successful companies in three main ways: 1. Dividends, which are a distribution of part of a company's net profit to shareholders, as part owners of the company. Most...