Every business is started mainly to earn profit because the first objective of business is to earn profit by selling goods and services to customers and consumers. From manufacturing goods and services to selling them to customers and consumers, sellers have to bear various types of expenses, those expenses can be met only by profits.
Profit helps in checking internal and external management because profit occurs only when the business is managed properly. Given below are various reasons that explain why profit is essential in business.
Table of Contents
Why is Profit Important in Business?
Profit is important in business due to the following reasons:
1. To Survive:
The survival of a business depends on its profit because there are various types of expenses in running a business, those expenses can be met only through profits. The second reason is that business is made to earn profit, if there is no profit then the business will have to be closed.
2. For encouragement:
Every person is motivated only when he gets something in return, similarly, business is also motivated only when it earns a profit. Profit encourages the business to function more efficiently so that the business can earn more and more profits.
3. To Growth:
Growth in business is the dream of every business and growth is possible only when there is profit in the business. The faster the profit increases, the faster the business will also grow; hence profit is important for the growth of business. Growth can be in the field of revenue, profit, production, employment etc.
4. To Measure Efficiency:
In today’s time it is very difficult for any business to earn profit that is why profit is the best method to measure the efficiency of any business because profit is earned when the business is managed properly.
5. For Social Welfare:
From the social point of view, social welfare is the objective of a business. To fulfill the social objectives, the business has to incur many types of expenses which can be met only by profit.
6. To Attract Investors:
Business is an economic activity and capital is required to carry out economic activity, therefore capital is the lifeline of business and without capital, business cannot start.
Profit of a business helps in attracting investors to invest capital in the business as investors are highly interested in investing capital in a profit-making business.
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QNA/FAQ
Q1. Why is Profit Important in Business?
Ans: Profit is important in business due to the following reasons:
1. To Survive
2. For encouragement
3. To Growth
4. To Measure Efficiency
5. For Social Welfare
6. To Attract Investors
Q2. Is profit important for the survival of the business?
Ans: Yes, The survival of a business depends on its profit because there are various types of expenses in running a business, those expenses can be met only through profits. The second reason is that business is made to earn profit, if there is no profit then the business will have to be closed.
Q3. Is profit important for growth of business?
Ans: Yes, Growth in business is the dream of every business and growth is possible only when there is profit in the business. The faster the profit increases, the faster the business will also grow; hence profit is important for the growth of business. Growth can be in the field of revenue, profit, production, employment etc.
