Question

Accounting profit maximization may not result in value creation for all the stakeholders? Do you agree?

Business decisions should never be made on the basis of expected returns alone. Business decisions should never be made on the basis of risk alone. Do you agree?

Answer 1

Yes, I will agree that accounting profit maximization will not be resulting into value creation for all the stakeholders because there are stakeholders which are are related to societal members and company will be having a corporate social responsibility in order to be sustainable in the long run so societal members are also corporate stakeholder and they should also be looked into.

it can be said that accounting profit maximization may not be resulting into value creation for all the stakeholders because the company will be having certain societal obligations in the form of corporate social responsibility and company should be trying to fulfill the responsibility in order to be socially responsible and sustainable in the long period of time so the given statement is true.

Business decisions should not always be made up on the basis of expected return alone for the expected risk alone because business should be exposed to a large number of risk and these risks are not always accounted into the expected return and the expected risk so, there are various factors which are highly unpredictable in nature and they will be certainly happening to the business in quicktime so there should be a proactive analysis of external environment as well as internal environment before making a business decision and it is not always about expected rate of return and expected risk but it is also about all the stakeholders concerned and the nature of the business and the futuristic scope of the business and other factors which are except the the expected return and risk associated with the decision making of business.

So it can be said that business decision should never be made solely upon expected rate of return and expected risk and they should always be accounting more external factors and political factors before arriving at a decision.