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Difference Between Profit Maximisation and Wealth Maximisation Explained

What is Profit Maximisation?

Advantages of Profit Maximisation

Disadvantages of Profit Maximisation

What is Wealth Maximisation?

Advantages of Wealth Maximisation

Disadvantages of Wealth Maximisation

Differences Between Profit Maximisation and Wealth Maximisation

The table below represents some differences between profit and wealth maximisation.

Parameters

Profit Maximisation

Wealth Maximisation

Primary Goal

Its primary goal is to generate significant profits.

Its primary goal is to generate the highest market value of common stock.

Goal Periods

It prioritises short-term goals.

It prioritises long-term goals.

Value of Time and Money

It disregards the time worth of money.

It values the time worth of money.

Risks and Uncertainty

It disregards uncertainty and risks.

It acknowledges uncertainty and risks.

Return Timing

It disregards the return's timing.

It is aware of the return times.

Profitability is a key factor in managing every firm. However, a business would not prosper over the long term if it just focused on making a profit. As a result, this calls for a company to combine wealth and profit maximisation strategies.

The management of financial resources through various actions is known as profit maximisation. It has a primary goal of raising a company's profits. The goal of wealth maximisation is to allocate financial resources to increase the value of shareholders' shares in a corporation.

Profit Maximisation vs Wealth Maximisation: Which Is Better?

FAQs About Profit Maximisation vs Wealth Maximisation