So earning of profit is necessary for the continuity of business. The survival of the business will be a day-dreaming affair in the absence of profit. It leads to exploitation of workers and consumers. Content Guidelines 2. PublishYourArticles.net - Publish Your Articles Now, Copyright infringement takedown notification template. Earning of profit should be the objective of business units. If their well being is not taken care of, then the company seizes to exist. 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”. However, what that value is and to whom it accrues is an important consideration. Profit earning is essential for the survival and growth of business enterprises. Value Maximization Objective 4. A business concern is also functioning mainly for the purpose of earning profit. Profit Maximization Objective 2. So many businesses get fixated on growth, but revenue growth without profit is simply more work. Main aim of any kind of economic activity is earning profit. Earning of profit can be made when exchange of goods takes place. Profit is the measuring techniques to understand the business efficiency of the concern. The business can be continued when there is a fair profit. This is a very important question. Profit and economic development are closely related with each other. The following are the economic objectives of a business: Every business is started for earning profit because profit is the acid test of every business. The above is just a partial list of what lack of profit does for a business. Profit is the financial gain or excess of return over investment. Profits enable a businessman to stay in business by maintaining intact the wealth producing capacity of its resources. Infact profit making is the primary objective for which a business unit is brought into existence. It is the source of revenue to … Profit maximization is also the traditional and narrow approach, which aims at, maximizes the profit of the concern. It leads to a state of social inequalities where rich becomes richer and the poor becomes poorer. 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. 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 needed because it serves as a provision of risk bearing. Another role of profit in business is economic development. The goal of every business should be to earn profits, this however should not be treatedas the sole objective of the business.A business should earn profit but not to ignore: I am going to look at this in the context of starting a small firm. 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. It is the reward for bearing risk and uncertainty in the business. Privacy Policy3. VII. 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. Role of Profit in Business, Is Profit the Sole Objective of Business In all business undertakings in the private sector, the main motive is to earn profit. The primary motive of the business is to earn profit because it provides stimulus to human efforts in undertaking business activities. 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. It is the duty of the top managers to see to it that the organisation culture is such set that all employees have a say in process they are incharge and change them for good. The objectives are: 1. In fact profit making is the primary objective for which a business unit is brought into existence. Profits must be earned to ensure the survival of business, its growth and expansion over time. Due to this reason, it has been rightly observed that profit is the acid test of the business unit. Profit is also necessary for the expansion and growth of business. The incentive of earning profit keeps the man engaged in business activities. Profit is essential for the survival of every business unit. If there is no economic development there is no profit to the business. 1. Profit maximisation – try to make the most profit possible – most like to be the aim of the owners and shareholders. A company’s goals and objectives are not the same. However, the business should not have the objective of maximization of profit because it leads to exploitation of the consumers. 9 May 2017 by Tejvan Pettinger A business has a variety of potential objectives from profit maximisation to cultivating good relationships with various business stakeholders. so every business has the objective of production of goods. Traditional theory assumes profit maximisation as the sole objective of a business firm. Great business profits is an indication from a society that the company is providing things that they want. Otherwise, it will eventually become insolvent. It is a reward for a risk successfully undertaken. In this assignment I am looking at profitable organizations which have main objective is profit maximization. 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. 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. A business objective, on the other hand, is a measurable step people take to achieve that goal. Profit earning should be regarded as the main objective of business unit. a. Profit may be regarded as an essential objective of business for various reasons (a)It is a source of income for business persons. 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. It is regarded as an index of business success. Every business is started to earn profits as it is essential for the survival and growth of business enterprises. It can be seen as the monetary reward to shareholders and owners of a business. A business can only grow and gain strength if it earns profit. Not really its the only objective of every business. Wealth Maximization Objective 3. PublishYourArticles.net is home of thousands of articles published by users like YOU. The primary task of business is to provide adequately for the cost of staying in business. Because it is the foremost factor in maximizing the wealth of the shareholders. The primary aim of business is to effect sale for the product produced. III. We can … 1. The presence of profit enables to meet various expenditures and face during the stage of recession. Before publishing your Articles on this site, please read the following pages: 1. 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. Profit is the driving force before and after entering into the business field. The main objectives that a business might have are: Survival – a short term objective, probably for small business just starting out, or when a new firm enters the market or at a time of crisis. Business has many other objectives to accomplish. Earning profits on the capital employed is the main objective of every business enterprise. A true vision for a business rests on foundations of both purpose and values. ADVERTISEMENTS: The following points highlight the four main objectives of business firm. The goal includes a broad primary outcome. Profit making should be the primary objective of the business because of the following reasons: I. 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. 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 shareholders are like the foundation stones of the company. It lowers the human values because the state of increased profit will lead to a materialistic society. Business needs objectives, without objectives the business is like a car without headlights driving blind. Profit is the lifeblood of business, without which no business can survive in a competitive market. maximization of profit is not desirable because it leads to exploitation. IV. Profit Maximization Objective: Profit as an objective has emerged from over a century of economic theory. TOS4. Infact profit is the oil which drives the wheels of business. 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. It is a primary goal and long term future health of your business. Profit is essential at the time of attracting additional capital for undertaking expansion and modernization measures. Profits must be earned to ensure the survival of business, its growth and expansion over time. 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. For example, a business wants to set up its franchise in another state in the next 3 years or it wants to increase its workforce in the coming months. Profit is the measure of the return on your investment. While making a profit is a simple and common objective for any for-profit business, company leaders surprisingly sometimes take their eyes off this goal. If I ask the question, is earning the sole objective of business? Set goals for profit levels and make decisions based on growing profit. I will be looking at the problems and requirements when aiming to begin a business either in … As such the “Purpose of Business” became profit maximization. Without profits, the business simply is not viable. Profit is the lifeblood of business, without which no business can survive in a competitive market. Profits must be earned to ensure the survival of business, its growth and expansion over time. profit maximisation as the sole objective of a business firm.. You can lower prices or invest heavily to generate revenue, but if your costs are too high, you don't make profit. VI. 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. Just as a person cannot live without food, a business firm cannot survive without profit. The role of profit in business can be judged from the following points. Profits help businessmen not only to earn their living but also to expand their business activities by … Most people go into business for some benefit or value creation. The people within the business have to be passionate about what they do and why they do it. Profit: The primary objective of every business is to earn profit. Driving revenue and proving consistent profitability is a major goal for any business. Independent from its potential to drive growth and development. Profit is the reward for bringing new products or processes to the market. Maximization of profit is opposed because of the following reasons: I. Economic theory often assumes that firms are rational profit maximisers. 2. Although the main objective of business is to earn profit but it is not be the sole objective of business. When leaders believe that their sole purpose is profit, they tend to view customers as "its." In all business undertakings in the private sector, the main motive is to earn profit. Here you can publish your research papers, essays, letters, stories, poetries, biographies and allied information with a single vision to liberate knowledge. Objectives of business are the purpose for which the business is established and performed. Disclaimer Copyright. Profit is how you build something you can sell. 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. The business objective is a goal, i.e. 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. Objectives to be fulfilled by business other that profits are: 1. Modern theorists would argue that profit is an essential business objective. Because of this reason the earning of profit occupies uppermost position in the minds of the businessmen. Goals are general while objectives are specific.A company’s business objectives provide a picture of how it plans to achieve its goal. Every business tries to make profits for itself and its shareholders. Most private sector businesses have this as their main objective. In practice firms have been found to be pursuing objective other than profit maximisation. Profit is essential for the growth of business enterprise. Infact profit is the oil which drives the wheels of business. Without a clear foundation, a business will never be truly strategic. The value of the business drops dramatically. Other Maximization Objectives. Profit is required to meet the individual as well as the social requirements of the trader. (vi) Manager Performance and Development: All business enterprises need managers to conduct and coordinate business activity. It leads to a number of corrupt practices. And the answer may surprise you. Profit is the driving force before and after entering into the business field. A business goal is vague in comparison.Whe… Profit is the total revenue from sales minus the total cost of resources employed by the entrepreneur. The business goals must then align with this foundation. In fact profit making is the primary objective for which a business unit is brought into existence. Copyright © 2015 PublishYourArticles.Net, All rights reserved. But what good does a profit do? where the businesswants to reach in the future. When you emphasize short-term profit over long-term customer satisfaction you eventually implode. II. If the firms are not earning profit then there is no economic progress in the country. IV. Profit acts as an index of performance for business, if the business firms are earning profits. Every business aims to earn a reasonable profit in order to survive and grow in this competing world. Profit is the lifeblood of business, without which no business can survive in a competitive-market. Profit earning should be regarded as the main objective of business unit. II. 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. 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. 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. It also states how long it will take, and what resources are available. It can expand and diversify business not only from reinvestment of funds but also getting loans from external sources for business. 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. It shows that the country is progressing satisfactorily. Although, earning profit cannot be the only objective of business, its importance cannot be ignored. What are the main objectives of a business. Profit maximisation is a variation of the profit objective. image source: ichef.com.au/wp-content/uploads/2014/01/profit.jpg. III. Also Read:  What is Business Entity Principle in Accounting. Profit is regarded as the main source of growth for business enterprise because it provides finance for expansion and diversification. Otherwise why would they? That profit, in particular, is the ultimate goal of any business. Profitability objective may be stated in terms of profits, return on investment, or profit to-sales ratios. Every business makes an attempt to reap maximum profit as possible in the given market conditions. However, in order for a business to become self-sustaining and capable of attracting investment, it must generate profits. 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