State and explain the objectives of a business.

1. Profit maximization – This is a traditional and a cardinal objective of a business. This is so for the following reasons:
• To earn acceptable returns to its owners. (i.e. Must not be less than bank rates + inflation + risk)
• So as to survive (through plough backs)
• To meet its day to day obligations.

2. To maximize the net worth i.e. the difference between total assets and total liabilities. This is important because:
• It influences company’s share prices.
• It facilitates growth (plough backs).
• It boosts the company’s credit rating.
• This is what owners claim from the company.

3. To maximize welfare of employees – Happy employees will contribute to the profitability. This includes:
• Reasonable salaries
• Transport facilities
• Medical facilities for the employee and his family
• Recreation facilities (sporting facilities).

4. Interests of customers – the company has to provide quality goods at fair prices and have honest dealings with customers.

5. Welfare of the society – the company has to maintain sound industrial relations with the society:
• Avoid pollution
• Contribution to social causes e.g. Harambee contributions, building clinics etc.

6. Fair dealing with suppliers. A company must:
•
• Meet its obligations on time
• Avoid dishonor of obligations.

7. Duty to the government: A company should:
• Pay taxes promptly
• Go by government plans
• Operate within legal framework.

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Kavungya answered the question on March 11, 2019 at 12:55