Dan Levy is in partnership with three others in their business, Outdoor Camping World. (Outdoor World...

 

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Dan Levy is in partnership with three others in their business, Outdoor Camping World. (Outdoor World had been Dan's business and Camping World had been run by the other three until they merged the businesses last year. They merged the names too, so they might keep all their old customers, even though it doesn't make much sense.) Dan argues that the firm should maximise gross profit margins [(selling price - buying price)/ selling price] on each item of stock. (a) Do you think this is a valid financial objective? (b) Is this objective consistent with maximisation of partners' wealth? (c) What problems do you see in operationalising this objective? Dan Levy is in partnership with three others in their business, Outdoor Camping World. (Outdoor World had been Dan's business and Camping World had been run by the other three until they merged the businesses last year. They merged the names too, so they might keep all their old customers, even though it doesn't make much sense.) Dan argues that the firm should maximise gross profit margins [(selling price - buying price)/ selling price] on each item of stock. (a) Do you think this is a valid financial objective? (b) Is this objective consistent with maximisation of partners' wealth? (c) What problems do you see in operationalising this objective?

Answer rating: 100% (QA)

a This could be a valid operational financial goal if the goal of the firm ... View the full answer