Marris Model Managerial Enterprise

In this model, the objective of firm is maximization of its balanced rate of growth. Maximisation of balanced rate of growth (G) depends on the rate of growth of demand for the firms’ product (G^d) and the rate of growth of capital supply (G^s)
    
G = G^d = G^s

Marris argues that the difference between the ‘goals of managers’ and the ‘goals of owners’ is not very wide. There may be areas of common interest for both managers and owners.

Thus, Marris states that

u_m = m (G^d, S) and

u₀ = 0 (G^s)

where is the job security constraint.

In view of job security, the managers become risk avoiders by choosing a prudent financial policy which consists of determining optimum levels of some critical financial ratios such as:
                                             

These three ratios are combined into a single parameter to represent the financial security constraint.

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