Business Studies – 5.3.1 What is profit and why it is important | e-Consult
5.3.1 What is profit and why it is important (1 questions)
Login to see all questions.
Click on a question to view the answer
Importance of Profit for a Business
Profit is crucial for the survival and growth of a business. Here are three important reasons:
- Survival and Sustainability: Profitability ensures a business has enough money to cover its ongoing expenses and remain operational. Without profit, a business will eventually run out of funds and be forced to close.
- Investment and Expansion: Profit provides the funds needed for investment in new equipment, technology, or expansion into new markets. This allows the business to grow and increase its market share.
- Attracting Investors: A profitable business is more attractive to potential investors. Investors are more likely to provide capital if they believe the business is likely to generate a return on their investment. Profitability demonstrates the business's potential for future growth and success.
- Reward for Risk: Entrepreneurs and business owners take financial risks. Profit is a reward for taking those risks and successfully running the business.