MGIS 317 Lecture Notes - Profit Maximization, Corporate Social Responsibility, Cash Flow

• School: University of Calgary
• Department: Management Information Systems
• Course: MGIS 317
• Professor: Ronald Schlenker

Document Summary

Profits are essential for rewarding investors in a business and for financing further growth and expansion. Profits are also necessary to persuade business owners or entrepreneurs to take risks. However there are serious limitations with this corporate objective: The focus on high short-term profits may encourage competitors to enter the market and jeopardize the long-term survival of the business. Many businesses seek to maximize sales in order to secure the greatest possible market share, rather than to maximize profits. The business would expect to make a target rate of profit from these sales. The owners of smaller businesses may be more concerned with ensuring that leisure time is safeguarded. The issues of independence and retaining control may assume greater significance than making higher profits. Most business analyst"s asses the performance of a business through return on capital employed rather than through total profit figures. Other stakeholders rather than owners and shareholders will give priority to other issues.