First, the mainstream view: the lack of profit maximization and enterprise value maximization advantages
(A) the lack of profit maximization
Profit maximization is the theoretical basis of classical microeconomics, and economists usually analyze and evaluate the behavior and performance of enterprises with the concept of profit maximization. Profit in economics refers to the total income MINUS the total cost of an enterprise, but the cost includes accounting cost and opportunity cost, so it corresponds to two different concepts: accounting profit and economic profit. The former is total income minus accounting cost, that is, various actual expenses in the production process of an enterprise, while the latter is total income minus accounting cost and then minus opportunity cost. Profit maximization in economics generally refers to the maximization of economic profit. In accounting, because cost is strictly defined as cost and expense, profit refers to the balance of income MINUS cost and expense. In financial management, profit maximization refers to "assuming that the expected return on investment of enterprises is determined, financial management behavior will develop in a direction conducive to profit maximization of enterprises."
Taken together, the shortcomings of the profit maximization goal are mainly manifested in the following aspects:
First, profit maximization is an absolute index, regardless of the input-output relationship of enterprises. For example, it also made a profit of 6.5438+0 million yuan. One enterprise contributed 5 million yuan, and the other enterprise contributed 7 million yuan. If we do not consider the amount of capital invested, it is difficult to make a correct judgment and comparison only from the absolute amount of profits.
Second, profit maximization does not consider the time when profits occur and the time value of funds. For example, the profit of 20 1 1 is 1 ten thousand yuan, and the profit of 20 15 is 1 ten thousand yuan. If the time value of money is not considered, it is difficult to accurately judge which one is more in line with the enterprise's goals.
Third, profit maximization fails to effectively consider the risk issue, which may make financial personnel pursue profit maximization regardless of the risk. For example, the same investment is 6,543,800 yuan and the annual profit is 6,543,800 yuan, but the profits of one enterprise have all been converted into cash, and the profits of another enterprise are all expressed as accounts receivable. If you don't consider the risk, you can't accurately judge which one is more in line with the enterprise goals.
Fourth, profit maximization often makes the financial decision-making behavior of enterprises tend to be short-term, and only pursues the increase of profits unilaterally, without considering the long-term development of enterprises.
(B) the advantages of maximizing enterprise value
Generally speaking, the enterprise value is "how much is the enterprise itself worth". [1] P9 Enterprise value can usually be expressed in two ways: one way is to determine the market value of the enterprise through market evaluation through buying and selling; The second is to express it through the present value of its future expected cash flow. Maximizing enterprise value is an abstract goal. Under the assumption of capital market efficiency, it can be expressed as the maximization of stock price or the maximization of enterprise market value.
It is generally believed that maximizing enterprise value as the financial management goal of an enterprise has the following advantages:
First of all, the goal of value maximization considers the time factor of obtaining cash income, and scientifically measures it with the time value principle of money to reflect the potential or expected profitability of enterprises, so as to consider the time value and risk of funds, which is conducive to overall planning, rational selection of investment schemes, effective financing and rational formulation of dividend policies.
Secondly, the goal of maximizing value can overcome the short-term behavior of enterprises in pursuit of profits. Because not only the past and present profits will affect the value of the enterprise, but also the expected future cash profits will have a greater impact on the value of the enterprise.
Thirdly, the goal of value maximization scientifically considers the relationship between risk and return, which can effectively overcome the wrong tendency of enterprise financial managers to pursue profits unilaterally regardless of risk.
Second, the comparative analysis of profit maximization and enterprise value maximization
(A) the above shortcomings of profit maximization are not insurmountable.
Economics believes that a complete theory should include definition, hypothesis, hypothesis and prediction, in which hypothesis refers to "conditions applicable to a certain theory". And that "any theory is conditional and relative, so assumptions are very important in the formation of theories ... without certain assumptions, analysis and conclusions are meaningless." [2]P 18 Similarly, if the assumption of profit maximization is taken into account, the shortcomings of profit maximization mentioned above are not insurmountable, on the contrary, they can be completely derived from it, and a correct comparison and judgment can be made.
First, about "absolute indicators". Indeed, profit maximization is an absolute index, but it is only for a single enterprise. It is usually assumed that "other conditions remain unchanged" and the amount of funds invested is equal. If you want to compare two or more enterprises, even if the profit and input are different, you can draw a correct conclusion by relaxing the hypothesis, that is, by its deformation index profit rate, such as the profit rate of total assets or the profit rate of self-owned funds.
Second, about "the time when profits occur". Generally speaking, the profit in profit maximization refers to the current profit. If two or more enterprises have different profits, including the time to generate profits, they are exactly the same. If the profits are generated in different periods, then correspondingly, as long as the profits in different periods are discounted and compared, the correct decision will not be affected at all.
Third, about "the risk of profit". If the profit is the same, but the risk of obtaining the profit is different, because it violates the assumption that other conditions are the same, then the profit can be converted into the value under the same risk coefficient according to the risk coefficient and compared, and the correct conclusion can be drawn.
Fourth, about "short-term behavior". Although profit maximization is the current indicator, the short-term decision with the goal of profit maximization may not be the optimal decision in the long run, but the constraints of short-term and long-term are different, so it is impossible to compare the advantages and disadvantages of different choices. Just like although the short-term minimum average cost is higher than the long-term average minimum cost, the decision to maximize short-term profits is long-term.
In the long run, it is far from the best decision, but it is still the best decision under short-term constraints. And no matter what kind of decision you make, you must consider the long-term factors. However, due to information asymmetry, the shorter the term, the more specific the constraints, so as to accurately predict the consequences of the decision.
(B) the shortcomings and defects of maximizing enterprise value
Although the index of enterprise value considers the time and risk of obtaining cash income, so that it can be directly judged when the time and risk are different, this index also has the following shortcomings, even more insurmountable than the shortage of profit maximization:
First of all, it is also an absolute index, regardless of the relationship between input and output of enterprises. For example, a year ago, Company A and Company B invested 6.5438+0 million yuan and 5 million yuan respectively. Now Company A is worth 6.5438+0.8 million yuan, and Company B is worth 6 million yuan. If you are an investor, which company should you choose? Of course, this can also be compared by its deformation like profit, but it is enough to show that the maximization of enterprise value is not better than the profit maximization index in this respect.
Secondly, it is difficult to estimate this value in detail and the operability is not strong. The calculation of profit is simple and easy to operate. For example, the "reverse cost method" of Handan Iron and Steel Co., Ltd. first determines the income and profit targets of the enterprise, and then deducts the target cost as the basis for assessment and control. In contrast, the enterprise value is not only difficult to estimate concretely, but also infeasible. For listed companies, the enterprise value is directly expressed as the circulating market value, which is of course intuitive and concrete. But in China, even listed companies have non-circulating state-owned shares and legal person shares, so how to measure the value of these shares? If it can't be measured directly, how to estimate the enterprise value and make financial decisions accordingly? If only refers to the market value of circulation, then the stock price and the value of the enterprise are changing every day. How to make financial decisions according to the ever-changing enterprise value when making decisions? Enterprise value has been changing, should financial decisions also be changing all the time? Of course, this is impossible, so in this case, how can the enterprise value guide the financial decision-making of the enterprise?
Third, the application scope of enterprise value is limited. No matter what kind of enterprise, the profit can be directly calculated by "income-cost" and directly reflected in the income statement as the operating results of the enterprise. In contrast, the estimation of enterprise value is much more complicated. As mentioned above, if the capital market is efficient, the market value of an enterprise can be measured by the stock price. However, due to the limitation of China's national conditions, this method is greatly restricted, especially for one-person sole proprietorship, partnership and unlisted companies. For these three types of enterprises, there are two ways to estimate the enterprise value. First, it is determined by market evaluation in the form of buying and selling, and it is impossible to auction continuously. Moreover, when evaluating enterprise assets, it is difficult to be objective and accurate due to the influence of evaluation standards and methods, which leads to the difficulty in measuring enterprise value; The latter needs to be able to accurately estimate the expected cash flow in the future, which is actually impossible due to the uncertainty and information asymmetry in the future. Therefore, if the goal of enterprise financial management is to maximize the value, if it is reasonable for listed companies with full circulation, then single ownership enterprises, partnerships and unlisted companies are difficult to apply in practical work due to various conditions.
Finally, the enterprise value is influenced by many uncontrollable factors, so it is easy to mislead the financial decision-making of enterprises. Although the corporate value of listed companies can be revealed by the change of stock price, the stock price is the result of many factors, many of which are beyond the control of enterprises themselves, such as systemic risks brought about by macroeconomic fluctuations and irrational expectations of investors. Therefore, if the maximization of value is the goal of enterprise financial management, on the one hand, it may make enterprises only pay attention to the stock price and deviate from the industry itself, misleading enterprise financial decision-making, on the other hand, it will also induce enterprises to publish false information conducive to the rise of stock price.
Third, the internal relationship between financial objectives such as profit and enterprise value.
(A) the relationship between profit and asset profit rate, earnings per dividend and earnings per share
In financial accounting, the calculation formulas of profit, asset profit rate and profit per share are as follows:
1. profit
Total profit = operating profit+investment income+subsidy income+non-operating income-non-operating expenditure+previous year's profit and loss adjustment.
Net profit (after-tax profit) = total profit-income tax expense
In which: operating profit = main business profit+other business profit-management expenses-financial expenses.
Main business profit = main business income-main business cost-operating expenses-main business taxes and surcharges
2. Profit rate of assets
Return on net assets = after-tax profit/owner's equity × 100%
Profit rate of total assets = after-tax profit/total assets × 100%
3. Dividend earnings per share and earnings per share
Profit per share = profit after tax/total share capital
Earnings per share are consistent with profits per share, which means that the company's profits (which can be divided into pre-tax and after-tax) in a certain period of time are divided by the total share capital. After-tax earnings per share are commonly used, and the calculation formula is: earnings per share = after-tax profit/total share capital.
As can be seen from the above formula, the profit rate of assets, earnings per share and earnings per share are directly determined by after-tax profits under the condition that other conditions such as owner's equity, total assets and total share capital remain unchanged. So as far as a single enterprise is concerned, if the goal of maximizing profits is achieved, as long as other conditions remain unchanged, then other goals will naturally be achieved. On the other hand, if the profit is not maximized, the above other indicators cannot be maximized. Therefore, profit maximization is a necessary and sufficient condition for maximizing asset profit rate, profit per share or earnings per share.
(B) the relationship between profit and shareholder wealth and enterprise value
1. Shareholder wealth and enterprise value
Since shareholders are for the company, shareholder wealth is the market value of the company shares owned by shareholders. It can be determined by the number of shares owned by shareholders, dividends per share and stock market price. With the number of shares unchanged, the wealth of shareholders mainly depends on the dividends paid to shareholders and the stock price. At any point in time, the wealth of shareholders can be calculated as follows:
(1) Multiply the current dividend per share by the number of shares held;
(2) multiply the current stock price by the number of shares held;
(3) The value of shareholders' wealth can be obtained by adding the dividend amount calculated above to the stock market value. The value of an enterprise is that it can bring future returns to investors. Similarly, at any point, the enterprise value is equal to the total dividend that the company can distribute plus the total market value of the stock.
If it is a joint-stock company, then the two are consistent. Only shareholder wealth focuses more on individual shareholders, while the focus of enterprise value is mainly on the whole enterprise. But if you add up the wealth of all shareholders, it is consistent with the value of the enterprise.