Role of profit in business
Answers
Profit can be seen as the monetary reward to shareholders and owners of a business. In a capitalist economy, profit plays an important role in creating incentives for business and entrepreneurs. ... To increase profits, firms may take action which cause market failure.
. Sources of Income
Investors invest their money in the business with the sole purpose of earning profit, since profit is a source of income, it is therefore provides the owners of business the mean with which they and their family members can live a comfortable life.
2. Continuity of Business
The incentive of earning profit keeps the man engaged in business activities. A business can only grow and gain strength if it earns profit. So earning of profit is necessary for the continuity of business.
3. Expansion of Business
One of the roles of profit in business is that businessman retains and reinvests a part of its profits in business undertaking stands on sound footing. It can expand and diversify business not only from reinvestment of funds but also getting loans from external sources for business.
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