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