Gujarat BoardEnglish MediumSTD 12 CommerceOCMFINANCIAL MANAGEMENT3 Marks
Question
Write a note on profit maximization.
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Answer
The objective of maximizing income of the company is called profit maximization.
In market, investors purchase the shares of company with a hope of earning maximum dividend. As a result, company should earn maximum profit out of its available resources. Moreover, its dividend policy should be based on maximization of profit.
In addition, this approach suggests that company should take up only those business projects which can earn good profits i.e. which aims at profit maximization.
This approach increases the share price of the company. This in turn increases company’s per-share earning.
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