business objectives
- Created by: Sophie.ellenx
- Created on: 07-04-21 14:32
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- business objectives
- a firms motives are often determined by who controls it - owners/ shareholders, directors and manager, state, consumers and pressure groups
- profit maximisation
- neo-classical economists assumes the intrests if owners or shareholders are most important - max profit in short run to maximise owners returns
- by short run profit maximising, firms can generate funds for investment and help them survive a slowdown
- firms producd where MR=MC
- diagram
- provides greater wages and dividends, retained profits are a cheap source of finance (saves paying higher interest later on) provide a stable price and output in long run
- reveune maximisation
- sales maximisation
- managers aim to maximise growth as salary may be linked to size of company, often easier for people to judge level of growth - increase prestige
- size if ften linked to security, growth will increase market share, tends to be a short term strategy - in long term firms are more likely to profit maximise
- want highest level of sales wthout making a loss, aim for normal profits, Produce where AC=AR
- diagram
- want highest level of sales wthout making a loss, aim for normal profits, Produce where AC=AR
- size if ften linked to security, growth will increase market share, tends to be a short term strategy - in long term firms are more likely to profit maximise
- managers aim to maximise growth as salary may be linked to size of company, often easier for people to judge level of growth - increase prestige
- satisficing
- due to principal agent problem owners and directors will have different goals
- therefore managers are more likely to profit satisfice - make enough profit to keep owners happy whilst following other objectves eg for their own benefit
- due to principal agent problem owners and directors will have different goals
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