Profit maximisation is not an adequate goal of the firm when making financial decisions because [blank].
A)it reflects shareholder wealth maximisation
B)it reflects the risk inherent in different projects that will generate the profits
C)it ignores the timing of a project's returns
D)it minimises the share price

Question

Quizplus · Accepted Answer

Profit maximisation ignores the timing of a project's returns, which can be important in making financial decisions. A project with a higher initial cost but greater long-term returns may be a better financial decision than a project with lower costs and immediate returns if the long-term returns outweigh the initial costs. Therefore, it is not an adequate goal of the firm when making financial decisions.

Profit Maximisation Is Not an Adequate Goal of the Firm