Daffodil International University
Faculties and Departments => Business Administration => Business & Entrepreneurship => BBA Discussion Forum => Topic started by: shibli on October 13, 2010, 06:22:38 PM
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Can we discuss on cost minimization and wealth maximization which is one of the objectives of Financial Management? For an organization to grow and sustain in the long run, how important is cost minimization?
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One way to minimize the cost is to put the right people in the right place, to cut down unnecessary expenses, to utilize human resources properly, and NOT to reward and give financial and other benefits to those who don't deserve.....A good human resource manager knows whom to give what......
over to all to BBA students who have studied Human Resources Management and Finance....
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Thanks mr. shibli sir for posting such a core concept of financial management.......................................
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We should be make portfolio to long run of our business. We have to invest our money in different sectors. If we fall in loss in any sector then other can help us to recover that loss. For example, you have 1,000,000 taka and you invest 200,000 in capital market, 200,000 in pharmaceuticals and remaining in Garments sector.
If Garments fall in loss then capital market and pharmaceuticals can help you to recover your loss. If you don’t make this portfolio then you may have to close your business.
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The process or goal of incurring the least possible opportunity cost in the pursuit of a given activity. Cost minimization is comparable to other objectives, including utility maximization and profit maximization. This goal, however, is generally used when circumstances constrain a decision. For example, a government agency has been assigned the task of building a bridge. It must now do so at the lowest cost possible.
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It is also concept of Economic .
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Using all resources in the organization optimally can help to minimize the cost.
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"Most companies that have CRM feel like it's about cost minimization rather than revenue maximization that makes a company successful in business," said Jeff Felton,
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I think it will be very helpful for financial managment. Thanks Mr. Shibli sir
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Very helpful for financial management
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As Mr. Limon said, we should diverse the capital so that the risk can be easily adjusted with return. Other than that, good raw materials should be chosen to make a product because it does not get wasted and also efficient workers should be employed. This thing can also maximize profit as these elements prevent unnecessary or wastage of materials as well as helps to position the product in the minds of customers and thus they prefer it... A sound financial planning could also serve in this respect. E.g- an organization should retain some portion of the profit and not distribute it among shareholders so that it could be used as capital. If this planning had not been made then an org. might have to borrow and thus have to pay interest, which could prevail unnecessary, ill-management of profits and a failed foresighting strategy as well as shows the inadequdcy of investment deed and of course the manager.
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As Mr. Limon said, we should diverse the capital so that the risk can be easily adjusted with return. Other than that, good raw materials should be chosen to make a product because it does not get wasted and also efficient workers should be employed. This thing can also maximize profit as these elements prevent unnecessary or wastage of materials as well as helps to position the product in the minds of customers and thus they prefer it... A sound financial planning could also serve in this respect. E.g- an organization should retain some portion of the profit and not distribute it among shareholders so that it could be used as capital. If this planning had not been made then an org. might have to borrow and thus have to pay interest, which could prevail unnecessary, ill-management of profits and a failed foresighting strategy as well as shows the inadequdcy of investment deed and of course the manager.
Well said my friend.........We all should learn the cost minimization process so effectively to apply it in business areas.................... thanks for your convenience............
Shajib
101-11-1375
BBA
Sec: B
25th Batch
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Thnx sajib... I think we all should know why cost should be minimized. The prime reason is to make an organization profitable. There are different aspects to make an organization profitable. Like, adjusting the capital with the org.'s liquidity. As we know, the main reason to reduce cost is to generate profit. So an organization can reduce liquidity and thus generate profitability by increasing capital. Another thing is, an org. should have a distinct knowledge about fixed, floating, direct and indirect expenses. For example- as we know direct expenses include the raw material, direct patern of wages and convenience. Now, if these are mishandeled then although the financial statements would be ok, but the org. would not be able to take a fair decision. And this may cause different misinterpretetions.
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Dear students, cost minimization also can be possible if we are aware enough about consuming utilities. Most of us are not conscious whenever we use electricity and water.
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Thanks Tanzina Ma'am, for your comments. By gathering knowledge about fixed, direct, indirect and floating cost (e.g- electricity etc.) I meant to say having the knowledge to consume it, showing the appropriate expenses to appropriate accounts etc. thus making fruitful financial statements.
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In the short run "cost minimization" and in the long run "wealth maximization".
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We see some people are overvalued in some organizations of Bangladesh....people should get the salary and other benefits what they actually deserve as per their skills and the outcome of their responsibilities. Thus cost can be minimized.
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Finding out under-utilized employees and putting them in the right place with proper responsibilities can be one of the solutions of cost minimization.
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Shibli Sir, I heard from my grandfather that after liberation war expert non-bengali workers were condemned and were sacked in order to give their places to bengali workers, who happened to be nothing more than novices... Here, I'm not advocating about bengalis or non-bengalis. But illustrating a fact that is, this type of cultural barrier is a prime reason for not utilizing the proper people to the proper places... And I do feel that, as cost minimization is subjected to generate more profit, we should bury these type of personal prejudice for the greater sake of an organization.
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Sir,
We have many ways to do it. actually we have to think how we will increase our wealther rather than
redusing them. sometimes a very common thing happen is that we have always spent more than what
we have. so we must do our cost management effectively.
in addition as we are thinking wealth maximization, we must do it ligally and honestly that most people
do it illigally in bangladesh.
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Rajib, the thing is profit maximization. As I had discussed earlier, liquidity contradicts profitability. So if you wanna increase profit you need to reduce liquidity i.e. if you wanna get profit, then invest rather than having it as cash or something relevant to it. Other than that, in profit making 2 things should be considered. One thing is legal and other is ethical. If you see any cold drink org. they sell their products in 90-95% profit than their total cost. Now would you tell this illegal? Of course not! We are living under "lazies faire" policy. But it is unethical.
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man,
I am talking about the black money or corrupted money
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It is a economic conceft. But it is nessary for every human. Today we expence more money for unnessary field. before careful for expence after posible cost minization.
Abu Sayed
101-11-1477
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@FAIYEZ
The objective of financial management is cost minimization and wealth maximization, not profit maximization. Thanks for your in-depth analysis though.
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:)Thanks Mam.............
We should make our mind so ready & appropriate for apprehending the genre of cost minimization......... & should implement of it..........
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Shibli Sir, I emphasized on profit maxization for one purpose only. And that is, if you want to increase your organization's profit, you need to balance it with an organization's liquidity. For example- If you invest money on share market, you are likely to lose it as it's uncertain (or you are investing on short term basis). But if you invest it on your business your risk may get big but your return may get bigger that you never know.
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Dear Sir, Wealth Maximization is the objective of any financial managment.
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Wealth maximization can be done by maximizing the price of shares.
Cost Minimization can be done by increasing production efficiencies.
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By investing the idle resources,minimize company contradiction.& procure more benefits can be helpful to maximize wealth..............
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Although the topic is going far beyond it all started, I think I need to describe my point.
We all know that, we invest in different projects to increase our assets. And we supply money on business, thus it becomes capital to generate profit. Thats why, capital and profit are both seen as owners equity. For example- a person has 50,000 and he has 2 options. 1. He could invest it on share market and 2. He could capitalize it on his business. He takes the first option. And ironically, the share goes to OTC market over a time period. Now, this guy could only pity himself, thinking that he should have invested the bucks on his business since he can monitor the activities and thus his 50 thousand could bring him profitability at short time. So, in this case I think that, profit>wealth...
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The objective of financial management is cost minimization and wealth maximization. . But we forget about that very often
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Thanks mr. sibli sir for giving an important topic.it is necessary for a financial manager.because without cost minimization an organization can not achive its goals .cost minimization is the main work of a financial manager as a financial manager of any kind of organization.
on the other hand cost minimization is also related in our real life.we should minimize the cost in our personal life. we have a budget in our personal life. without the proper use of cost minimization in our personal life we can't achieve our goals successfully.
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Cost minimization and wealth maximization are important for an organization to make their profit. If an organization can develop an awareness in their employee's mind,they can make huge profit.Because, if the cost is decreased, the profit is incresed.