Profit maximization is the traditional approach and the primary objective of financial management. It implies that every decision relating to business is evaluated in the light of profits. All the decision with respect to new projects, acquisition of assets, raising capital, distributing dividends etc are studied for their impact on profits and profitability. If the result of a decision is perceived to have positive effect on the profits, the decision is taken further for implementation
When a firm applies profit maximization, it is basically saying that its primary focus is on profits, and it will use its resources solely to get the biggest profits possible, regardless of the consequences or the risk involved. Profit maximization is a generally short-term concept.
Profit maximization is the most important objective of a business entity. Every business, in addition to striving for the attainment of other objectives, does its best with special importance to make profits.
Profit in general is the money that a business makes when it sells something for more than it paid for it. It is the income from an investment or transaction
Considering the merits of profit maximization, more than anything else, the first and foremost benefit from the objective of profit maximization is that the profit becomes a benchmark against which the efficiency and the success of a business are judged.
On the basis of evidences showing the failure of various businesses, it thus may be rightly said that a business without profit maximization cannot survive. Hence, profit maximization is the basic objective of any business to survive and to remain in the market.
It is to be noted that the business that generates high level of profitability will not only gather sufficient funds to be employed for the business expansions or new business avenues but also increases the return of its shareholders.
Every business needs to maintain sufficient funds for its day-to-day