Wealth maximization is one of the modern approaches, which involves latest innovations and improvements in the field of the business concern. The term wealth means shareholder wealth or the wealth of the persons those who are involved in the business concern.
Wealth maximization is also known as value maximization or net present worth maximization. This objective is an universally accepted concept in the field of business.
Favourable Arguments for Wealth Maximization
- Wealth maximization is superior to the profit maximization because the main aim of the business concern under this concept is to improve the value or wealth of the shareholders.
- Wealth maximization considers the comparison of the value to cost associated with the business concern. Total value detected from the total cost incurred for the business operation. It provides extract value of the business concern.
- Wealth maximization considers both time and risk of the business concern.
- Wealth maximization provides efficient allocation of resources.
- It ensures the economic interest of the society.
Unfavourable Arguments for Wealth Maximization
- Wealth maximization leads to prescriptive idea of the business concern but it may not be suitable to present day business activities.
- Wealth maximization is nothing, it is also profit maximization, it is the indirect name of the profit maximization.
- Wealth maximization creates ownership-management controversy.
- Management alone enjoy certain benefits.
- The ultimate aim of the wealth maximization objectives is to maximize the profit.
- Wealth maximization can be activated only with the help of the profitable position of the business concern.