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