Risks may be internal or external which will affect the overall operation of the business concern.
They indirectly create assets for the organization. The losing importance of profit maximization is not baseless and it is not only because it ignores certain important areas such as risk, quality, and the time value of money but also because of the superiority of wealth maximization as an objective of the business or financial management.
The term 'profit' is used in two senses. However, the benefit they get is the good reputation, and therefore consumers may prefer its products. It is because different mindset will have a different perception of profit.
It is not explicitly mentioned which profit to maximize as there are numerous types of profit in a business. Therefore, the more certain the expected return, the higher the quality of benefits.
It may be total profit or rate of profit. A business with sound profits is perceived as efficient both in terms of operation as well as investment.
This is due to the fact that an adequately profitable business has the capacity and is usually inclined to pay its obligations on time and hence creditworthy.
Between project A and B, project A may be more profitable however if it is substantially more riskier than project B may be preferable. Despite the above cited limitations, and also the availability of other technical alternative approaches, profit maximization criteria is still used for making decisions on a large scale particularly by small scale businesses, primarily due to its simplicity to understand and use and economy in terms of time and cost.