Proft and wealth
I have started my studies in financial administration and I want to share some ideias with you guys.
Proft is the measure of the results, as Wealth is the criation of value over time.
Profit is not necessarily related with wealth. Companies can incrise profits in many ways, some of theses ways can even reduce its wealth. For example, a company can incrise its profit by reducing the quality of their feedstock. That strategy certainly will help to incrise its profit in the short term, because reduce costs. But the custumers can not approve the quality of the new products, what can result in the loss of customers in the long term.
As we can see in the example above, the simple maximization of profits can led to desastrous results. That is way, the main goal of the financial managers is to maximize the wealth e criation of value for the shareholders, and to ensure the health of the company in the long term.