Question

eludicate the statement:

Value maximization is simply an extension of profit maximization to a world that is uncertain and multiperiod in nature.

Answer 1

Value maximization is extension of the profit maximization because value maximization will also look for maximization of the value of the entire company but it will be done in perspective of the stakeholders and it is trying to look for a longer perspective whereas profit maximization will always be looking for a short term perspective but value maximization will be trying to protect the interest of various stakeholders in the organisation and it will try to accommodate the interest with the interest of the firm and synchronise interest in order to maximize the value of the firm in the long run so it will be trying to provide long term capital appreciation opportunity for the shareholders by following with ethical approach.

Value maximization is always looking for the long-term wealth generation of the company and it will always undertake all such projects which will be ethically correct and it will not involve any kind of exploitation of interest of any of the stakeholders and it will be trying to generate the value of the company in the long run and it is an extended arm of the shareholder profit maximization and it will done in a world which is highly uncertain and multi-period so business need to survive and sustain in the long run and it has to adopt with the value maximization which is a better philosophy than shareholders value maximization which is highly concentrated at interest of the shareholders.