Positive Impacts of Profit Maximization Free Essay Example, 2750 words

Profit maximization has various positive impacts on a firm including expectation and goodwill, profit optimization perspective creates an expectation in a firm thus creating an environment where the premium price is used and cost-cutting is a primary goal. These are important goals in the modern competitive market where every firm struggling to meet the competition and reduce costs. The perspective also creates expectations among shareholders that they will have immediate gains and also improves the firm s goodwill. Profit optimization also has a big advantage of generating cash flow (Donaldson Preston, 1995, p. 65). Under profit maximization perspective, primary considerations are given to investments, re-investments of funds and expansions of operations and markets, which results in the generation of more cash flow. Such considerations allow the firm to operate in an environment that is more cost-efficient. Profit maximizing firms are known to be the best in cost minimization sin ce they are more concerned about reducing costs to improve profits. Profits keep building and this creates a healthy bottom line for the firm. Profit maximization can thus be used to allow the firm to generate more cash flow and that way reduces its debts or expands its operations. Profit maximization attracts investors and financiers of the firm. We will write a custom essay sample on Positive Impacts of Profit Maximization or any topic specifically for you Only $17.96 $11.86/page