Maximizing profits as the main objective Traditional (neoclassical) theory assumes that the primary objective of the company is to maximize profits. This is if the business is controlled by the owner. This hypothesis is based on the fact that firms make decisions on production and prices. Furthermore, the company takes all necessary actions to obtain the maximum possible profit. Management theory assumes that firms do not necessarily act to maximize profits. The fundamental principle behind this is the separation of ownership from management, the complexity of the organization and the manager of the company maximizes his own utility and growth rather than profits. The reason for this is that managers can be judged on the level of sales revenue. I will provide arguments for and against this assumption “that the primary motivation of the firm is to maximize profits” and draw a conclusion by analyzing the behavior of firms and further discussing theories of firms. The profit maximization hypothesis is based on two premises, first that the owner has control of the day-to-day management of the business and, second, that the owners' primary desire is to obtain a profit greater than the amount invested in the company. Since this hypothesis is based on two assumptions, then if these two assumptions do not hold it is understandable to believe that the objectives of the company are not to maximize profits. Well, that will depend on the motivation of individual businesses. If the ownership and control of a business is in the hands of a single person or small groups of people, then it is reasonable to assume that the goal of the business owners is to maximize profits. But most of today's companies are owned by shareholders and other large cooperatives, but the day-to-day control of the company is handled by management. Therefore, management's objectives may differ from those of shareholders and conflicts may arise. "For example, Baumal (1959) suggests that the company controlled by the manager is likely to have as its main objective the maximization of sales revenues rather than the profit maximization favored by shareholders" (Applied Economics 7thed page 54). Furthermore, studies of 177 companies between 1985 and 1990 by Conyonand Gregg (1994) found that the pay of senior executives of large companies in the UK was mostly related to sales growth. Other studies found that profit was the most important determinant of executive income. For example: “A survey conducted by ManagementToday in 1990 axis...... half of the paper ......, argued that regardless of how real companies may behave and the rationality constraints to which they may be subject , surviving companies are those that have achieved high profits. Because of the strength of these arguments, we tend to accept that profit maximization theories are justifiable. Bibliography Alchian, A (1950), “Uncertainty. Evolution and economic theory”, Journal Of Political Economy. 58(3), 211-221. Buzzel, R, & Gale, B. (1987). The PIMPS Principles, Institute for Strategic Planning. Conyon, M. & Gregg, P. (1994). C-suite compensation: A study of the sensitivity of top executive compensation to firm-specific shocks, National Institute Economic Review, August. Friedman, Milton (1953), Essay in Positive Economics, Chicago: Chicago University Press. Griffith, Alan & Wall, Stuart (1997). Applied Economics: An Introductory Course. 7th edition.Lipsey & Chrystal (1999). Principles of Economics. 9th Ed.Marris, R. (1964) The economic theory of italism 2005.