Profit maximization does not adequately describe the goal of the firm because:
A)profit maximization does not require the consideration of risk.
B)profit maximization often has a short-term focus.
C)maximization of dividend payout ratio is a better description of the goal of the firm.
D)Both A and B

Question

Quizplus · Accepted Answer

Option A is correct because profit maximization does not take into account the risk associated with earning profits. Option B is also correct because a focus on short-term profit maximization may come at the expense of long-term growth and sustainability. Option C is incorrect because dividend payout ratio is only one aspect of the overall goal of the firm.

Profit Maximization Does Not Adequately Describe the Goal of the Firm