Profit as the Objective of the Business a common ingredient of business activity is profit. Profit is the difference between a business’s total revenues or sales receipts and the total of its production costs operating expenses and taxes. Profit is the ultimate goal of business. It is the measure success of the business and the reward for taking a risk.
The Role of Profit in business
Regardless of whether a business produces goods or provides services, the common goal of any business is to earn profit. Profit is the difference between the total revenues or sales receipts of the total of its production costs. Operating expenses, and taxes. In bread bakery, for example, the bakery has to pay for its raw materials (flour, butter shortening, yeast, and salt). Equipment (mixers, ovens, wrapping machines), Employees and the energy it uses. When the bakery sells the bread to the supermarket. It charges some extra money or mark-up more than cost of making the bread. That extra part of the selling price is profit.
Why Do Businessmen Want Profit?
Profit is the ultimate goal of business person and the reward for taking a risk. I ketch person who operates a business is risking money. The baker does not know that people will buy, or the extent of buying of, the bread when it is produced, but money is invested in business on the possibility that people will buy. The baker is bearing a risk to test a chance. Where there are no profits, it would not be worthwhile for the baker to risk the money.
Changing and Developing Patterns of Business
Business is changing and developing continuously. Everywhere in the world, change and evolution are a way of life. Successful business and businessmen have responded well to changes. Those who fail to respond well must fail. The changing pattern of business is reflected through the following factors:
Scarcity of Natural Resources
Natural resources are limited. Mankind has very few sources of renewable resources and energy. In the context of continuous use and decrements of resource base, business must devise new ways to provide goods and services by using less energy or resource or by inventing alternative sources of the or resources.
Globalization and International Business
Today business is more globalization than ever before and the process is going on. Some companies emerged as giant multinational companies. Because of the operation of these’ Multinational Corporation’ International Business ‘ ‘International financial Management ‘ International Economics’ international markets etc. Emerged as important disciplines. This globalization is going on in an ever increasing rate.
The Changing Pattern in Technology
Technology is changing continuously. Industrial Revolution occurred by virtue of scientific or technological innovation Technology Revaluation regularly shapes and reshapes industries. Computer communication robotics or artificial intelligence, and laser technology are developing at a speedy rate and are shaping the works places. Office is now virtual office by virtual of technology.
The Necessity of Large Scale Production
Increased Productivity is helpful for the effectiveness of the organization. It contributes to the goal-attainment. Management is in the higher efficiency and effectiveness. Managerial talent will have to be focused on the increased productivity which enhances output per worker. Reduces cost per unit and increases contribution margin and helpful to cope with the global competition.
The Increased Cry for Corporate Social and Environmental Responsibility
Society and environment are at stake because of the operation of the business. Business is accused of the greenhouse effect. So future managers must accomplish the confliction objective of profitability and social and environmental responsiveness.
The above are some of the challenges business met in the past Or meeting today or will meet in the near future. Business that can’t adapt to change must face a downfall. Business responds to these challenges in different degrees.