Question

Profit maximization does not always lead to wealth maximization because

Answer 1

Profit maximization may not always lead to wealth maximization because profit maximization is a concept based on the short term perspective. Earning profits doesn't necessarily mean that wealth is created in the long run. Profits are a subset of wealth. Only focusising on profits leads to exploitation of employees

Wealth maximization is creation of value, it focusses on value creation. The true evaluation of a business is through wealth maximization as in this concept the cash flows are more important and not only the profits. This approach believes that money has a time value, it believes in the time value of money. The true performance of any organization can be determined by it's capability to generate wealth.

So, profit maximization will not always lead to wealth maximization. Modern managers are now shifting from the concept of profit maximizaton to wealth maximization.