Pursuing a maximization reduction financial strategy comes with the obvious risk that the company may be so entrenched in the singular strategy meant to maximize its profits that it loses everything if the market takes a sudden turn. For example, a company may find that it gets the most profit selling games so instead of keeping a balanced inventory, it invests solely in buying to sell. If the it goes out of favor or the makers of the games begin to limit the price that can be charged for the system, the company that relied solely on its investment this could lose everything. Similarly, if a company focuses only on maximizing its profit, it may miss opportunities for investment and expansion.
Maximization reduction financial requires maximum return and try to get a reduction in losses as much as possible.The professional in charge tries to earn maximum returns for the company though proper financial management. He cannot guarantee profits in the long run because of business uncertainties. However, a company can earn high profits even in the long-term, if: • it takes proper financial decisions. • And uses the finance of the company properly. Wealth accumulation is also a main objective of financial management. This means to earn maximum wealth for the owners So, management tries to give a higher dividend to the shareholders. He also tries to increase the value of the investment. The value is directly related to the performance of the company. Better the performance, higher is the market value of shares and vice-versa. Therefore one must try to maximize shareholder's value.