Every business is started to earn profits as it is essential for the survival and growth of business enterprises. Profit earning should be regarded as the main objective of business unit. The need of profit in business is left to cover the cost of production and also create a surplus for undertaking expansion and diversification work. The survival of the business will be a day-dreaming affair in the absence of profit. Because of the importance of profit to business, it has been rightly told that “Profit can be no more than the objective of a business than eating is the objective of living”. Earning of profit should be the objective of business units. However, the business should not have the objective of maximization of profit because it leads to exploitation of the consumers. The primary motive of the business is to earn profit because it provides stimulus to human efforts in undertaking business activities. Because of this reason the earning of profit occupies uppermost position in the minds of the businessmen. Some people feel that earning of profit should be the main objective of the business and others are against it because they feel that maximization of profit should be the sole objective of business enterprise.
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Profit making should be the primary objective of the business because of the following reasons:
I. Profit is essential for the growth of business enterprise. Profit is regarded as the main source of growth for business enterprise because it provides finance for expansion and diversification. The business can be continued when there is a fair profit.
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II. Profit is essential for the survival of the business enterprise because the existence of business unit can not be seen in the absence of profit. The presence of profit enables to meet various expenditures and face during the stage of recession.
III. Profit is required to meet the individual as well as the social requirements of the trader.
IV. Profit helps in fulfilling various social goals because a business is expected to serve various sections of the society like the consumers and the labourers.
V. Profit is regarded as a good measure of efficiency of the organisation because the performances of a business unit is judged from the angles of profit. Due to this reason, it has been rightly observed that profit is the acid test of the business unit. It is regarded as an index of business success.
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VI. Profit is essential at the time of attracting additional capital for undertaking expansion and modernization measures.
VII. Profit is needed because it serves as a provision of risk bearing. The primary task of business is to provide adequately for the cost of staying in business.
Profit earning is essential for the survival and growth of business enterprises. maximization of profit is not desirable because it leads to exploitation. Maximization of profit is opposed because of the following reasons:
I. It leads to exploitation of workers and consumers. For the sake of more profit, the businessman may exploit the worker by paying less and may exploit the consumers by providing them less quality products.
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II. It leads to a state of social inequalities where rich becomes richer and the poor becomes poorer.
III. It leads to a number of corrupt practices.
IV. It lowers the human values because the state of increased profit will lead to a materialistic society.