Profit is not only an objective …

Profit making is essential in business because of the following reasons :

(i) Incentive - Profits provide the basic stimulus to establish and operate business enterprises. Profit is the driving force behind private enterprise. It is the return on capital and reward for the risk of entrepreneurship.

(ii) Survival - Profit covers the risk and costs of staying in business. Profit helps to maintain intact the revenue generating capacity of business. Through profits, an enterprise can replace obsolete machinery and equipment.

(iii) Growth - In order to expand and grow, an enterprise needs funds. Retained earnings or ploughing back of profits is an important source of capital for expansion and innovation. Profits provide the means of self-financing.

(iv) Measure of efficiency - Profit is an important measure of success for a corporation. Profit is the criteria by which people evaluate the efficiency and performance of business enterprise.

(v) Prestige - A losing concern has no goodwill or image in society. Accumulation of wealth through business earning has enabled people to build business empires. Society, too, can progress only when human effort yields profit because a losing organisation leaves less for all to share.