The paper "Running a Limited Company" is a wonderful example of an assignment on finance and accounting. A capitalist economy is an economic system that is based on the principles of supply and demand. In a capitalist economy, there is no government intervention. The market forces of supply and demand are left to control the market, that is, determine the prices of goods and services. The objectives of a firm operating in a capitalist economy include profit maximization, sales maximization, growth maximization (İbrahim, 2009). Profit maximization Profit maximization is the main objective of all firms.
It is the process by which firms aim at acquiring the highest achievable levels of profit in the process of producing and selling goods and services. In economic analysis, firms undertake activities and actions that are aimed at increasing profits (İbrahim, 2009). The difference between total revenue obtained by selling output and the total cost that is used in producing output in a firm is the profit. Therefore, firms with an objective of maximizing profits cuts on their costs of production maximize revenues in order to generate the highest difference between total costs and total revenues. Sales maximization This is another objective of a firm in a capitalist economy.
Maximizing sales involves selling as much output as probable. Firms that maximize sales are bound to maximize their revenues. However, it is not a guarantee that firms maximizing sales will essentially maximize their profits, this is because; increasing sales can lead to an increase in the cost of production such that marginal cost surpasses marginal revenues (İbrahim, 2009). A firm benefits from sales maximization in that, it obtains a competitive advantage over its rivals and at the same time increasing its monopoly power in such a way that, it can increase its prices thus, maximize profits.
Growth maximization is the same as sales maximization and it involves takeovers and mergers. Question 2: Discuss the view that the Keynesian theory of the circular flow of money does not provide a full explanation of the 21st-century economy, and the private sector will fulfill the role of Government in maintaining the levels of aggregate demand. Use any graphs, diagrams, or calculations to illustrate this view? Keynes tried to analyze aggregate demand using the circular flow diagram.
The diagram indicates how income earned is spent thus supporting a circular flow of money that sustains a normal functioning economy (Peter, 2000).
David, I., and Nicholas, M., 2008. Running a Limited Company. New York: Jordans.
İbrahim, Ö. 2009. Wealth, welfare and the global free market: a social audit of capitalist economics. London: Gower Publishing, Ltd.
Landsburg, S. 2002. Price Theory and Applications. London: South-Western
Leslie, C., 1998. Management accounting. New York: Cengage Learning
Markwell, D. 2006. John Maynard Keynes and International Relations: Economic Paths to War and Peace. New York: Oxford University Press.
Peter, K. 2000. Macroeconomic essentials: understanding economics in the news, (2nd ed). Cambridge: MIT Press.