Question

Profit can no more be the objective of business than eating is the objective of living. Do you agree ? Give reasons.

Solution

1. Some people believe that profit maximization is the sole objective of business while some others question the profit motive. Both the views are devoid of reality.
2. A minimum amount of profit is as much essential for the survival and growth of business as food is for human life.
Urwick has very aptly put it, 'Earning of profits cannot be the objective of business anymore than eating is the objective of living'.
3. A business cannot exist without profits. At the same time, money making is not the main goal of business - just as eating is not the only aim of life.
4. Profit maximization is harmful to business as too much eating is for the health of human being.
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.

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Nature And Purpose Of Business

Profit can no more be the objective of business than eating is the objective of living. Do you agree ? Give reasons.

Some More Questions From Nature and Purpose of Business Chapter

Write any three features of profession.

Explain the concept of business.

Define the term 'industry'.

Define 'Commerce'.

Define trade.

Define internal trade.

Define External Trade.

Define risk.

Name the functions of business.

How is business an economic activity?

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