Question

explain the role of profit in business (
5 Marks question)​

Answer 1

Here's your answer :-

Every business operates with an aim to earn more than what has been invested and profit is the excess of revenue over cost. Profit plays an important role in business

(i) It is a source of income for business persons.

(ii) It can be a source of finance for meeting expansion requirements of business.

(iii) It indicates the efficient working of business.

(iv) It can be taken as society’s approval of the utility of business.

(v) It builds up the reputation of a business enterprise.

Hope it helps ☺

Answer 2

Every firm runs with the intention of making a profit greater than the investment, and profit is the difference between revenue and costs.

Profitability is crucial to business:

1. It provides income for business owners.
2. It may provide funding to help a company meet its expansion needs.
3. It shows owns that the business is operating effectively.
4. It can be interpreted as social acceptance of the value of a business.
5. It enhances a corporate enterprise's repute.

Why does a business exist?

• A business purpose explains the motivation for the founding of a company.
• It outlines both the goals of the company and what makes it special.
• A company's purpose is substantially shorter than both a mission statement and a value statement.

As the business owner starts to project higher profits, he makes additional investments, which in turn boosts employment. Shorter than both a mission statement and a value statement, this will increase incomes, which in turn will increase demand for a variety of commodities in the markets.

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