1.3 OBJECTIVE OF CORPORATE FINANCIAL DECISIONS

At the very outset, it should be made clear that the ultimate goal of corporate financial decisions is the maximisation of owners’ economic welfare. Although there is unanimity on the achievement of this goal, the literature on the subject contains divergent views on its achievement. Whereas, earlier views have suggested profit maximisation, later views suggest wealth maximisation as a means to achieving the maximisation of owners’ economic welfare.

FIG. 1.1 Profit maximisation

1.3.1 Profit Maximisation

Total Revenue and Total Cost: Profit maximisation simply means maximising the income of the firm. ...

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