Profit Maximization Is The Ultimate Goal Of A Business

Most business managers tend to think that profit maximization is the ultimate goal of a business. Currently, yet when the profit maximizing theory is upheld, the idea of the term “revenue” has expanded in order to factor in for account doubt met when profits are realized by the business and also factor in the time value of money. The time value of money means that what a dollar is worth today will be worth less in the farther you go into the future. Looking at profit maximization as a whole, the purpose of profit maximization in the short-term will be exchanged form profit maximization in the long-term.

Explaining what is meant by the “present value of expected profits” requires that you first understand the meaning of the term "value" and then understanding the definition of "present value." There are various types of expressions when discussing value, for example: book value, market value, going-concern value, break-up value, and liquidating value. These are all forms of value that are discussed in business and economics. The “value” of a business is referred to in terms of net cash flow. This is the present value of expected future gains. Therefore, to get this information, you need to find the course of the business’s net cash flow in upcoming years. When you have identified this, you will need to convert the expected future profit values into present value. This can be done by reducing the value by a suitable interest rate.

It should be noted that expected profit in any one period can itself be considered as the difference between the total revenue and the total cost in that period. Thus, one can, alternatively, find the present value of expected future profits by subtracting the present value of expected future costs from ...

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...The main difference between oligopolies from the other types of markets is that oligopolies are dependent on the other sellers within the industry. This means that if one seller makes a significant change, whether it is price or production, it will have an effect on the other competitors within the market. Therefore, most oligopolies take into consideration about how their decisions may affect the competition.

Unlike the previous two markets, there are barriers when new businesses try to enter the market. These barriers could be anything from the financial necessities to technology. Oligopolies are usually distinguished by economies of scale. When defining economies of scale, this means that when production increases, the cost of production decreases. Therefore, economies of scale can cause smaller manufactures to be at a disadvantage to the larger manufacturers.