What is profit maximization?

Profit maximization is the short- or long-term process that firms use to determine what leads to the highest possible total profit. Firms, and other financial institutions, use profit maximization to ensure the best output and price levels are achieved in order to improve and maximize their returns.

For profit maximization to be successful, a company needs to first understand its financial goals. From there, it can figure out how to adjust sale prices, product costs, and output levels to then meet that goal. Profit maximization is the act of adjusting factors to find the best way to maximize profits as a business.