Some people feel that earning of profit should be the main objective of the business and others are against it because they feel that maximization of profit should be the sole objective of business enterprise. Profit maximisation is a variation of the profit objective. Privacy Policy3. Profit is regarded as the main source of growth for business enterprise because it provides finance for expansion and diversification. Here you can publish your research papers, essays, letters, stories, poetries, biographies and allied information with a single vision to liberate knowledge. Profit may be regarded as an essential objective of business for various reasons (a)It is a source of income for business persons. Profit is the measure of the return on your investment. Profits must be earned to ensure the survival of business, its growth and expansion over time. image source: ichef.com.au/wp-content/uploads/2014/01/profit.jpg. Driving revenue and proving consistent profitability is a major goal for any business. Profit earning should be regarded as the main objective of business unit. It lowers the human values because the state of increased profit will lead to a materialistic society. (vi) Manager Performance and Development: All business enterprises need managers to conduct and coordinate business activity. Profits must be earned to ensure the survival of business, its growth and expansion over time. It's a prior or u can say most important objective of business. profit maximisation as the sole objective of a business firm.. Large firms pursue such goals as sales maximisation, revenue maximisation, a target profit, retaining market share, building up the net worth of the firm, etc. Investors invest their money in the business with the sole purpose of earning profit, since profit is a source of income, it is therefore provides the owners of business the mean with which they and their family members can live a comfortable life. Modern theorists would argue that profit is an essential business objective. It shows that the country is progressing satisfactorily. The key points underpinning the economics of a profit maximizing firm Neoclassical model of the firm states that organization will have the main objective of maximizing its profit within a given period of time. Another role of profit in business is economic development. Goals are general while objectives are specific.A company’s business objectives provide a picture of how it plans to achieve its goal. Profit is needed because it serves as a provision of risk bearing. Maximization of profit is opposed because of the following reasons: I. II. Profit is the lifeblood of business, without which no business can survive in a competitive market. 1. The primary motive of the business is to earn profit because it provides stimulus to human efforts in undertaking business activities. A business goal is vague in comparison.Whe… PublishYourArticles.net - Publish Your Articles Now, Copyright infringement takedown notification template. It leads to a state of social inequalities where rich becomes richer and the poor becomes poorer. Because of this reason the earning of profit occupies uppermost position in the minds of the businessmen. The business goals must then align with this foundation. V. Profit is regarded as a good measure of efficiency of the organisation because the performances of a business unit is judged from the angles of profit. Without profits, the business simply is not viable. The business objective is a goal, i.e. The above is just a partial list of what lack of profit does for a business. A business does not have to make a profit if the business owner does not mind operating the business with funds from other sources and losing money on it over the course of time. It leads to exploitation of workers and consumers. One of the roles of profit in business is that businessman retains and reinvests a part of its profits in business undertaking stands on sound footing. VII. where the businesswants to reach in the future. Profit is essential at the time of attracting additional capital for undertaking expansion and modernization measures. TOS4. If we increase our business our profit automatically increase.if our only aim is to earn then we can't do progress in business.our business will always there. The primary aim of business is to effect sale for the product produced. I will be looking at the problems and requirements when aiming to begin a business either in … It is a reward for a risk successfully undertaken. Profit making should be the primary objective of the business because of the following reasons: I. Profit, therefore, is a reward for the future which is uncertain. The answer will be Profit maximization and earning is not the sole objective of business. The business can be continued when there is a fair profit. The presence of profit enables to meet various expenditures and face during the stage of recession. Profit is essential for the survival of the business enterprise because the existence of business unit can not be seen in the absence of profit. Profit: The primary objective of every business is to earn profit. A business which is mainly motivated for the making of money seldom grow well in the long run and never commands respect in the society. Infact profit is the oil which drives the wheels of business. Profit is how you build something you can sell. Otherwise why would they? That profit, in particular, is the ultimate goal of any business. The people within the business have to be passionate about what they do and why they do it. I am going to look at this in the context of starting a small firm. Set goals for profit levels and make decisions based on growing profit. In this assignment I am looking at profitable organizations which have main objective is profit maximization. Because it is the foremost factor in maximizing the wealth of the shareholders. so every business has the objective of production of goods. For the sake of more profit, the businessman may exploit the worker by paying less and may exploit the consumers by providing them less quality products. The need of profit in business is left to cover the cost of production and also create a surplus for undertaking expansion and diversification work. Profit is essential for the growth of business enterprise. III. Profits must be earned to ensure the survival of business, its growth and expansion over time. Objectives to be fulfilled by business other that profits are: 1. Not really its the only objective of every business. The incentive of earning profit keeps the man engaged in business activities. Earning of profit should be the objective of business units. Profit Maximization Objective: Profit as an objective has emerged from over a century of economic theory. IV. However, the business should not have the objective of maximization of profit because it leads to exploitation of the consumers. But what good does a profit do? In fact profit making is the primary objective for which a business unit is brought into existence. Business needs objectives, without objectives the business is like a car without headlights driving blind. Every business aims to earn a reasonable profit in order to survive and grow in this competing world. Every business tries to make profits for itself and its shareholders. Profit maximisation – try to make the most profit possible – most like to be the aim of the owners and shareholders. Profit is required to meet the individual as well as the social requirements of the trader. Profit is the measuring techniques to understand the business efficiency of the concern. IV. Great business profits is an indication from a society that the company is providing things that they want. However, in order for a business to become self-sustaining and capable of attracting investment, it must generate profits. Earning of profit can be made when exchange of goods takes place. If the firms are not earning profit then there is no economic progress in the country. A true vision for a business rests on foundations of both purpose and values. Content Guidelines 2. In all business undertakings in the private sector, the main motive is to earn profit. It can be seen as the monetary reward to shareholders and owners of a business. Copyright © 2015 PublishYourArticles.Net, All rights reserved. Although, earning profit cannot be the only objective of business, its importance cannot be ignored. The primary task of business is to provide adequately for the cost of staying in business. So earning of profit is necessary for the continuity of business. Otherwise, it will eventually become insolvent. However, what that value is and to whom it accrues is an important consideration. Profit maximization is also the traditional and narrow approach, which aims at, maximizes the profit of the concern. Every business makes an attempt to reap maximum profit as possible in the given market conditions. Profit is the driving force before and after entering into the business field. The way leaders talk about customers matters. Profit is distinct from revenue. A business can only grow and gain strength if it earns profit. Every business is started to earn profits as it is essential for the survival and growth of business enterprises. It is a primary goal and long term future health of your business. The objectives are: 1. Here are 11 reasons why profit is essential to the longevity, growth and safety of the business: Essential for survival – Any entity cannot spend more money than it takes in. Most private sector businesses have this as their main objective. A company’s goals and objectives are not the same. Profit is the total revenue from sales minus the total cost of resources employed by the entrepreneur. It is the reward for bearing risk and uncertainty in the business. The goal includes a broad primary outcome. II. A business concern is also functioning mainly for the purpose of earning profit. Disclaimer Copyright. The value of the business drops dramatically. The culture should always be such that employees have that instinct to innovate in every aspect of the organisation, be it marketing, sales, clients, partners, etc. Profit is essential for the survival of every business unit. However, in the real world, there are many other objectives that a firm can pursue. It can expand and diversify business not only from reinvestment of funds but also getting loans from external sources for business. If there is no economic development there is no profit to the business. Main objective of business is to run business according to demand we not always see for profit we have to see increase business our profit automatically increase. Because of the importance of profit to business, it has been rightly told that “Profit can be no more than the objective of a business than eating is the objective of living”. Profits help businessmen not only to earn their living but also to expand their business activities by … Profit is the reward for bringing new products or processes to the market. Profit is the financial gain or excess of return over investment. 1. Objectives of business are the purpose for which the business is established and performed. So many businesses get fixated on growth, but revenue growth without profit is simply more work. In practice firms have been found to be pursuing objective other than profit maximisation. A business should earn profit but not to ignore: Is Earning the Sole Objective of Business, What is Strategy, Steps in Management by Objectives MBO, Functions of the French Constitutional Council, The provision of quality goods at reasonable prices to the consumers, Payment of all due taxes to the government treasury, Generating and offering good remuneration to its employees, Contributing to the general welfare of the society. Without a clear foundation, a business will never be truly strategic. Profits enable a businessman to stay in business by maintaining intact the wealth producing capacity of its resources. PublishYourArticles.net is home of thousands of articles published by users like YOU. Profit, for any company, is the primary goal, and with a company that does not initially have investors or financing, profit may be the corporation’s only capital. Profit helps in fulfilling various social goals because a business is expected to serve various sections of the society like the consumers and the labourers. Profitability objective may be stated in terms of profits, return on investment, or profit to-sales ratios. VI. If I ask the question, is earning the sole objective of business? Profit is the driving force before and after entering into the business field. Economic theory often assumes that firms are rational profit maximisers. 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