FIN 240 Chapter Notes - Chapter 5: Profit Maximization, Business Ethics, Longrun
Document Summary
Ethics - study of what constitutes right or wrong behavior. Branch of philosophy focusing on morality and the way moral principles are derived and implemented. Has to do with the fairness, justness, righties or wrongness of an action. Business ethics - looks at the decisions businesses make or have to make and whether those decisions are right or wrong. How businesspersons apply moral and ethical principles in making their decisions. Evaluate what duties and responsibilities exit or should exist for businesses. In theory, if all firms strictly adhere to the goal of profit maximization, resources flow to where they are most highly valued by society. In an ideal world, profit maximization leads to the most efficient allocation of scarce resources. Triple bottom line - corporation"s profits, its impact on people, and its impact on the planet. In attempting to maximize profits, corporate executives and employees have to distinguish between short-run and long-run profit maximization.
