In this case study, Stanley’s focus is on maximizing profits. Yes he is correct. This should be the goal of any firm and any financial manager. He should be easily able to maximize the value and also extend the wealth of the shareholders or stockholders if he continues to maximize profits.
The increases in net profits over the period from 1997 to 2003 reflect that Stanley is focusing on maximizing profits. The manner in which he is deciding on employing a software designer also reflects this financial goal. Wealth maximization requires a long-term prospective, along with consideration of risk and cash flows; while profits maximization does not integrate these factors in the management decision process. Therefore, Stanley is using the correct financial goal.
Stanley is focusing on maximizing profit, as shown by the increase in net profits over the period2003 to 2009. His dilemma about adding the software designer, which would depress earningsfor the near term, also demonstrates his emphasis on this goal. Maximizing wealth should be thecorrect goal for a financial manager. Wealth maximization takes a long-term perspective and alsoconsiders risk and cash flows. Profits maximization does not integrate these three factors (cashflow, timing, risk) in the decision process.