ECON 1100 Lecture Notes - Corporate Finance, William Baumol
16 Jan 2013
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Document Summary
In much of economic theory, it is assumed that a business aims to maximise profits. There are, however, many other potential financial objectives of a business. The table below summarises three alternative models of business objectives that have attracted popular support: This model argues that businesses try to maximise sales or revenues rather than profits. In this model, williamson argues that management act to further their own interests in other words to achieve personal utility rather than to meet the interests of outside investors. Businesses run with this kind of objectives tend to deliver high levels of remuneration to management rather than the highest possible profits. The consensus model presents a slightly more complicated model of business objectives. In this case, it is argued that a business is an organisational coalition of shareholders, managers, employees and customers each with different objectives.
