Explain the Role of Profit in the Business.

Explanation

Profit is one of the most important objective of every business and a businessmen earns profit because of the following reasons -
1) Profit is essential for survival - Profit is a source of income for a businessman which becomes his means of livelihood. Profit is required to satisfy the needs of the businessmen and his family members.
2) Symbol of efficiency - Profit indicates that whether a business is being managed efficiency or not. Higher the profits, higher efficiency and lower profits indicates inefficiency of management.
3) Reward for bearing the risk - Profit is considered as price paid to businessmen for bearing risk. Investment is done by businessmen in order to earn profits. The higher the risk,leads to more profit, lower risk leads to lower profits
. 4) Helps to gain Goodwill - Profits helps in maintaining better reputation in the market.The market price of shares increases with increase in Profit. Efficient employees prefer to work in profit earning firms because there they will get high salaries.