Managerial Theories of Firm Marris

Topics: Management, Economics, Strategic management Pages: 3 (1030 words) Published: May 4, 2013
Managerial Theories of Firm Marris and Williamson's Models Marris’ Managerial Thesis of Firm Marris has put forth a significant thesis of firm as per which the managers do not optimise profits but in its place as per him, they look for to optimise profits balanced rate of increase of the firm. Optimisation of balanced rate of increase of the firm entails optimisation of the rate of increase of demand for the commodities of the firm and rate of increase of capital supply. If I symbolises balanced increase, Id for the increased rate of demand for the commodity, Ic for the rate of increased of the capital supply, then the aim of the manager is: Optimise I = Id = Ic In looking for to optimising the balanced increased rate, a manager countenances the subsequent two restraints: 1. Marginal Restraint 2. Financial Restraint Managerial restraint denotes to the strength of the managerial team and their skills. Financial restraint denotes to the subsequent three financial proportions: 1. Debt to Total Assets Ratio, which is merely termed as Debt Ration or D/A 2. Liquid Assets of the firm to Total Assets, is termed as Liquidity Ratio L/A 3. Ratio of Retained Earnings to the Total Profits or Retention Ratio (πr / π) It is significant to note that these financial variables ascertain the job security of the managers. If these financial ratios set by the manager intersects the cautious line, they reveal the firm to the jeopardy of being taken over by other or the managers can be suspended which can imperil their job security. Thus, financial restraints are related with the job security. Managers consider job security while considering business plans. Rationale for Optimising Balanced Increased of the Firm A significant query arises that the manager looks for to optimise the balanced increase rate of the firm, which is why do they mutually optimise the rate of increase of demand for firm’s...
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