Asked by Chloe Summerville on May 31, 2024
Verified
If managers do not choose to maximize profit, but pursue some other goal such as revenue maximization or growth,
A) they are more likely to become takeover targets of profit-maximizing firms.
B) they are less likely to be replaced by stockholders.
C) they are less likely to be replaced by the board of directors.
D) they are more likely to have higher profit than if they had pursued that policy explicitly.
E) their companies are more likely to survive in the long run.
Revenue Maximization
The strategy of adjusting prices or sales volume to generate the highest possible income from sales, not necessarily coinciding with maximum profit.
Takeover Targets
Companies that are potential candidates for acquisition by other companies due to their attractive attributes or undervalued assets.
Profit-Maximizing Firms
Businesses that operate with the objective to produce the quantity of output that maximizes the difference between total revenue and total cost.
- Elucidate on how the objectives of businesses might diverge between the pursuit of maximum profits and the achievement of different targets.
Verified Answer
SA
Samer AlanbakiJun 05, 2024
Final Answer :
A
Explanation :
Profit-maximizing firms are likely to view companies that prioritize revenue maximization or growth as potentially undervalued assets and potential targets for acquisition. Therefore, managers who choose these goals over maximizing profit may become more likely to become takeover targets.
Learning Objectives
- Elucidate on how the objectives of businesses might diverge between the pursuit of maximum profits and the achievement of different targets.