Question

Profit maximisation is the only objective of financial managemant. OR Maximisation of profit is real and complete motive.

Answer 1

This statement is 'False' because of the following reasons :
(i) Profit maximisation is the objective of financial management but not the only objective as wealth maximisation is also the important principle of financial management.
(ii) Profit maximisation is important because :
(a) a business cannot survive without profit.
(b) it is the tool of measuring the success of a business firm.
(c) higher profitability results in better dividend to equity share holders and
(d) it can generate funds for future expansion.
(iii) So profit maximisation has to be achieved for socio-economic welfare.
(iv) But wealth maximisation is also the principle as it increases the
market value of equity shares resulting in increase in the investments.