FIN 101 - Profit Maximization vs. Wealth Maximization

Profit Maximization vs. Wealth Maximization by Classroom

1. Classroom
Welcome to

2. FIN101
Profit Maximization
Vs.
Wealth Maximization
Class
Room

3. Profit maximization
Works to increase
net income
Class
Room

4. Wealth maximization
Works to increase
net present value
Class
Room

5. Profit vs. Wealth
Class
Room
Vague
Doesn’t Specify
Time, Risk and
Amount
Clear
Specifies All
Required Time, Risk
and Amount

6. Profit vs. Wealth
Class
Room
Owner-Centric
Concerned About
Owner’s Growth
and Net Income
Business-Centric
Concerned About
All The
Stakeholders

7. Profit vs. Wealth
Class
Room
Short Term
Only Cares About
Short Term Gains
Long Term
Plans For Long
Term Gains

8. Profit vs. Wealth
Class
Room
Ignores
-Risk
-Inflation
-Time Value of
Money
Accounts for
-Risk
-Inflation
-Time Value of
Money

9. Profit vs. Wealth
Class
Room
Traditional
Old, Not Suitable
for Current
Businesses
Modern
New Concept,
Suitable for Current
Businesses

10. Summary
That’s why Organization Goals
Should Be Shareholder
Wealth Maximization over
Profit Maximization
Class
Room