Sales Revenue Maximisation Vs Profit Maximisation

Every business faces the decision of how to maximize profit.

Sales revenue maximisation vs profit maximisation. Unless you are a philanthropist running a nonprofit organization your main motivation for being in business is to generate a healthy income. Revenue maximization is the theory that if you sell your wares at a low enough price you will increase the revenue you bring in by selling a higher total volume of goods. Revenue maximisation example. Profit maximization as an objective has a number of limitations.

Sales maximization is an activity that concentrates on revenue transactions and can be accomplished by employing various sales strategies and programs. In the example below a small firm produces tennis rackets and sells them in boxes of 10 to retail stores. Maximising sales revenue is an alternative to profit maximisation and occurs when the marginal revenue mr from selling an extra unit is zero. But in a practical scenario revenue maximization holds true.

It depends on the industry in question. To make it simple revenue maximization is a point at which a business keeps selling till marginal revenue does not fall negative and profit maximization is a point at which business sells to point at which its marginal cost does not increase its marginal revenue. Profit maximization entails a more complex program of business plans and activities that does not concentrate on sales alone. However maximized revenue does not equate with maximized profits as you may have to sell your goods at a loss to get them off of your shelves.

It encompasses both revenue and expenditure transactions. Sales maximization and profit maximization are distinct business objectives. Revenue maximization passes all those tests to become a rational objective for any business. While revenue maximization and profit maximization may appear to be one and the same this is not necessarily the case.

In other industries pursuing short term profit maximisation may lead to a big loss of. Historically profit maximization has been given quite a lot of importance as the main objective of any business. Revenue maximisation will be at q2 p2 mr 0 sales maximisation whilst making normal profit will be q4 p4. Sales maximization is an approach to business where the company s primary objective is to generate as much revenue as.

The key difference between wealth and profit maximization is that wealth maximization is the long term objective of the company to increase the value of the stock of the company thereby increasing shareholders wealth to attain the leadership position in the market whereas profit maximization is to increase the capability of earning profits in the short run to make the company survive and.