Theme 3: Micro

Question 1

What are the four business objectives?

Answer 1

1. Profit Maximisation: maximise profits (earn the highest possible level of net income)
2. Revenue Maximisation: maximise total revenue from the sales of goods and services
3. Sales Maximisation: maximise the number of units sold, regardless of profit
4. Satisficing: achieve a satisfactory level of profit or performance, rather than maximising it

Question 2

What are the reasons for Profit Maximisation?

Answer 2

1. Provides a financial return to the owners/shareholders
2. Attracts investors and capital
3. Indicates efficient resource allocation and cost control
4. Often a primary goal for profit-driven firms

Question 3

What are the reasons for Revenue Maximisation?

Answer 3

1. Focuses on increasing market share and capturing a large customer base
2. May be used when a company wants to establish its presence in the market quickly
3. Can lead to higher long-term profits if accompanied by cost control