ABSTRACT
This chapter concludes that a company should aim to make enough profit to allow the owners to receive a return that satisfies them. The first is that a company should aim to maximize profits. The problem is to know what 'maximize' means. It was discovered that 'maximize profits' is a meaningless exhortation and that the traditional Return on Capital Employed is so flexible a yardstick as to be useless. Privately owned companies can probably arrange to make the return to their owners to suit the owner's convenience or to minimize the combined incidence of tax. From the shareholder's target it is usually a simple matter to calculate a profit target for the company for if dividend cover, taxation and loan stock in proportion to equity remain constant, a growth of 7 per cent in dividends means a growth of 7 per cent in Gross Trading Profits.
