Achievement 4 by @iloveakuma Task: Applying Markdowns

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Good day to all #steemians I am very excited today because I will be presenting my achievement 4. Hope someone learns some lessons from it. Let's talk Financial management 😊

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PROFIT MAXIMIZATION Vs WEALTH MAXIMIZATION

These 2 terms are often used interchangeably, when in reality, they are quite different. Let's take a deeper look.

WEALTH MAXIMIZATION

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^{"Wealth maximization is a set of activities that manage financial resources intending to increase the value of stakeholders" - Warren Buffett}

Wealth maximization is the concept of increasing the value of a business in order to increase the value of the shares held by its stockholders. The concept requires a company's management team to continually search for the highest possible returns on funds invested in the business, while mitigating any associated risk of loss. This calls for a detailed analysis of the cash flows associated with each prospective investment, as well as constant attention to the strategic direction of the organization.

The most direct evidence of wealth maximization is changes in the price of a company's shares. For example, if a company spends funds to develop valuable new intellectual property, the investment community is likely to recognize the future positive cash flows associated with this new property by bidding up the price of the company's shares. Similar reactions may occur if a business reports continuing increases in cash flow Source

PROBLEMS WITH PROFIT MAXIMIZATION

✓ A firm may minimize its investment in safety equipment in order to save cash, thereby putting workers at risk.
✓ A firm may continually pit suppliers against each other in the unmitigated pursuit of the lowest possible parts prices, resulting in some suppliers going out of business.
✓ A firm may only invest minimal amounts in pollution controls, resulting in environmental damage to the surrounding area.

PROFIT MAXIMIZATION

"Profit maximization is the murderous strategy of global corporation hierarchies." - Jean Ziegler

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