Question

What is the role of profit in business?

Answer 1

Earning a profit is the sole motive of any business activity. It is not possible for a business to sustain itself for a long time if it does not earn sufficient profits. This is because, for a business to continue, a part of profit has to be reinvested in the business. Reinvestment also ensures the growth prospects of a business and enhances its future profit-earning capacity. Profits are regarded as the reward for undertaking the risks associated with a business. If a business is not earning profits, then it is considered a non-viable venture.