Reference no: EM131572108

Wealth maximization is a process that increases the current net value of business or shareholder capital gains, with the objective of bringing in the highest possible return. While profit maximization is the ability for company to achieve a maximum profit with low operating expenses. The wealth maximization strategy generally involves making sound financial investment decisions which take into consideration any risk factors that would compromise or outweigh the anticipated benefits while the profit maximization strategy is cost reduction. Wealth maximization entails corporate benefit while profit maximization entails owners benefit.

So, should the firm pursue profit maximization or instead increase the wealth of its shareholders?