Why is maximizing profits an inadequate goal on its own?

1. Maximizing profits is one approach to raising a firm's value, but it should not be the only one. 2. The approach favors short-term gains over achieving long-term goals. 3. Consider a firm in a highly technical and competitive industry that does no research and development. 4. In the short run its profits rise, because research and development is very expensive. 5. In the long run it may lose the ability to compete, because it has no new products. 6. Its value to its owners therefore falls even though its reported profits rose, which is exactly the failure the wider goal avoids. 7. Wages, unearned revenue and interest are all captured inside the profit figure, so none of them is what the profit goal misses. _Source: OpenStax Introduction to Business (CC BY 4.0), Ch 16 "Understanding Financial Management and Securities Markets", section 16.1 The Role of Finance and the Financial Manager_