Scholars such as Friedman suggest that treating the economic responsibility as the most important responsibility of a business, is called a profit-maximising view, and “the social responsibility of a business is to increase its profits.” This kind of view states that a company should be operated on a profit-orientated basis, with its sole mission being to increase profits. This approach would seem to benefit stockholders, as well as stakeholders, as the stockholder is going to benefit from the profit made by the company and will gain something back from the company, however problems can occur when the businesses and companies do not balance their ethical responsibility, as they can therefore be perceived as greed and unable to balance their corporate social responsibility, and will cause a bad name for a business. So although the stockholder may also be gaining profit by doing this (what the company sees as doing the right thing) is not necessarily the right thing to do in terms of stakeholders. However, Friedman would argue that as long as the business is maximising its profit, that is the main point and so the loss of the stakeholders is less important. This argument can be deemed as weak as Friedman’s approach does not mean that stakeholders can be benefited alongside stockholders, and so disagrees with
By requiring any potential projects meet the division’s respective hurdle rate, the company ensures that their investments will have high enough returns to compensate for any risks that must be undertaken. In addition to using the cost of capital as the hurdle rate, Marriott is considering using the cost of capital to determine inventive compensation. In other words, it was proposed that employees receive bonuses based on their division’s return on assets compared to the hurdle rate. It is appropriate to use the cost of capital as a hurdle rate in determining which projects should be pursued. It is standard practice for companies to discount future cash flows at a predetermined discount rate to determine whether or not the company will be profitable.
What is more, a company may choose to pay dividend as the consideration for their investment, because high dividend payout is important for investors as dividends provide certainty about the company's financial well-being. Dividends are also attractive for investors looking to secure current income. In addition, some analysts indicate that how the decrease and increase of a dividend distributions from Champion can affect the price of its security. Companies like Champion that have a long-standing history of stable dividend payouts would be negatively affected by lowering or omitting dividend distributions. So it would be positively affected by increasing dividend payouts or making additional payouts of the same dividends.
The return on assets and return on equity ratios are also better for Hershey’s because the company is making more money on less investment then Nestlé. External Analysis The first of Porter’s five forces is the threat of new entrants. “Identifying new entrants [to an industry] is important because they can threaten the market share of existing competitors” (Strategic Management). Fortunately for The Hershey Company,
These scenarios made it possible for the company to enjoy high profit margins. The situation here and the purpose of the paper is to explore alternative ways that the Guillermo Company can use some financial concepts to improve the chances of the company surviving is predicament. For the Guillermo Company to be able to weather these new forces of competition and resist extinction, the company must improve their profitability, match competitors on wages scales and, also eliminate any wasteful operation process. Solutions
The management believes that the investment made by the company to expand will increase its market share and be more productive than competitors. They also believe that the newly developed products will render the competitors products. In addition to that, the company’s future is seen as bright by management and shareholders. 3. In theory, to fund an increased dividend payout or a stock repurchase, a firm might invest less, borrow more, or issue more stock.
Concepts: (Total) Profit Approach – This approach is defined as trying to maximize the profit of the Company. While this objective is important, it must be considered in concert with the objective of providing a socially useful function (Perreault et al, 2007, p. 89. A second important function is that the Company must consider their behaviour as being ethical or not when trying to maximize profits. The actions of Premier Fitness were likely motivated by an objective of maximizing its profit. The Company used lower prices to attract customers and then charged them a higher cost than advertised.
If the share is fairly priced, market could also interpret the repurchase behavior as a positive signal that the board has confidence in the company’s future performance. 2. Should Dubinski recommend a large share repurchase to the board? What are the primary advantages/disadvantages of such a move? Yes, Dubinski should recommend a large share repurchase to the board.There are
The quality of their products is important to them and their consumers. Desired behaviours: The Director of Finance wanted management to focus on the important matters, be able to spot problems quicker, and improve their commitment to achieve objectives. In general, the company wants workers to improve productivity and efficiency to increase profits. Management Controls: There were cash incentives in place that were based on the subjective performance evaluations performed by an employee’s immediate superior. There was also a performance measurement system in place.
Furthermore, it also mentioned in the theory of Arthur Laffer that any hike in taxes would lead to an increase in revenue in the short term but it would be offset by decreased tax returns in the long term. It also worth mentioning that tax evasion could become a problem with high income tax rates. Examples of tax evasion schemes involve people investing in businesses that make a loss, taking advantage of the tax breaks involved. Overall, income tax rates that create an incentive to work are likely to increase productivity and help an economy grow. Income tax changes affect aggregate demand in various ways.