There Are Problems with Using the "Profit Maximization" Criterion

question 30

Multiple Choice

There are problems with using the "profit maximization" criterion. Which of the following is (are) correct?
I. Profit maximization has an ambiguous definition of "maximizing profits."
II. Profit maximization fails to consider the risks associated with alternative decisions.

• A) Only statement I is correct
• B) Only statement II is correct
• C) Both statements I and II are correct
• D) Neither statement I nor II is correct

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Definitions:

Operating Revenues

Income generated from the core business activities of an entity excluding non-operating income sources.

Remeasurement

The process of converting foreign currency amounts into a functional currency using exchange rates that reflect changes in market conditions.

Translation

The process of converting the financial statements of a foreign subsidiary into the reporting currency of the parent company, according to appropriate accounting standards.

Purpose

The underlying motive or reason for the creation or existence of something.