Question

The goal of every firm should be to maximise the wealth if of its shareholders through profits. Discuss any ten strategies that firms can use in order to maximise profitability?

Answer 1

Shareholder wealth maximization is the ultimate goal of any business firm, the wealth can be maximize with maximization of profit .

Profit = revenue - expanses

some better strategy for profit maximization are :

• Operational excellency by proper and optimal utilization of resources
• Technology superiority to reduce the cost of production
• Identify new business opportunities with high profit margin
• increase in sales value
• Order consolidation to reduce the cost of operation
• high quality of product with premium pricing ( increase the profit margin)
• reduction in fixed cost ( like salary of managers , bills of electricity) without any change in variable cost
• reduce the usage of labor
• reduction in level of inventory
• benchmark the key ratios , mainly to check on financial item
• development of new product line
• reduce the cost of capital by creating a proper mix of debt and equity.