Importance of Profit in Business

Importance of Profit in Business Profit acts as a vital role in the functioning of the economic system. In any industry profit acts as a signal that buyers want more output from that industry. Profits provide incentive for firms to increase production and encourage new firms to enter into that industry. The profit cannot be seen as a selfish motive of any business but induces entrepreneurs to take long business risk. Unless there are no prospects of generating profit entrepreneurs will not devote time and invest resources in any business activity. It encourages firms to develop new products to lower production cost and to provide better services to the consumers. Profit is also expands business activity of the organization. Profit generated from the business reinvests again to expand production or invest into new business. So it allows the firm to continue to business operation. Entrepreneurs can only be motivated to expand its business when it can successfully generate profits from its business operations. The objectives of business objectives besides profit are facilitative objectives and are meant to be subservient to the profit motive. It can be pointed out that private enterprises are operated on behalf of and for the benefit of the owners. It can be advocated that the owners who have assumed the business risk of investing their funds should get suitable return in terms of profit. It is a reward for the entrepreneurs to share the owning and operating business and also serves as a stimulant for business effort. In any business organization profit is treated as a financial yardstick for measuring business efficiency and for evaluating managerial competency. It evaluates how well the decisions and actions of managements turn out to be effective and how well unwise resources to maximize value for the organization. Profit is the main indication how competitive be business organization is. Business efficiency is often expressed as price- Earning, profit to sales volume, earning to capita l employed, earning per share and so on. It is directly or indirectly released to profit generated by the business organization. Outside investors also equate profit with the degree of business efficiency and managerial competence and commit their funds in light of such equation and other related assessments. So the manger uses its resources and engages in activities designed to increase its profits so long as it stays within the rules of the game. The directors of companies have a fiduciary responsibility to act in the best interest of the shareholders. The managers are agents of the shareholders and therefore have a moral obligation to manage the firm in the interest of the shareholders, which obviously is to make as much money as possible and maximize shareholder wealth. The shareholders are the owners of the organization and therefore the profits belong to them. The firms objective is also to finance companys growth, create value not only for its shareholders and also create wealth for all the stake holders for the society. Profit provides resources required to achieve the corporate objectives. As business is a continuing entity it must grow and expand for its sustainability and profit allows the firm to reinvest in new and emerging business opportunities. Profit is highly correlated to generating cash, which brings more flexibility to the business at a lower cost. Stockholders (owners) have a financial interest in the business and obviously expect financial return. The business affects their livelihood because they need money to live and purchase material things. In a market characterized by many firms competing with one another, above normal profits provide important signals, but are not likely to be maintained over long periods of time. That is firms already in the market respond to higher profits by increasing output and new firms will have an incentive to enter the market as well. The result will be on an increased supply of the product, lower prices and ultimately lower profits. The result in competitive markets is that profits provide important signals but are somewhat transitory in nature. It can also be argued that a manger of a business organization has a direct responsibility to his/her employers to conduct business in accordance with their desire usually to make as much money as possible. Elasticity An important concept in understanding supply and demand theory is elasticty and it has a profuound impact on the profit of an organisation. In this context, it refers to how supply and demand change in response to various stimuli. The elasticity of demand measures the responsiveness of demand to changes in a factor that affects demand. Elasticities can be estimated for price, income, prices of related products, and advertising expenditures. The own-price elasticity is the ratio of the percentage change in quantity demanded to the percentage change in price, and is a negative number. Demand is price elastic if a 1% increase in price leads to more than a 1% drop in quantity demanded, and inelastic if it leads to less than a 1% drop in quantity demanded. Price Elasticity of Demand A Price change can either increase or decrease total revenue, depending upon the nature of the demand function. The profit of the firm depends upon the sales revenue of the firm and sales revenue is subject marked demand and price of the product. Here Price Elasticity of demand plays a crucial role and determines the level of real demand of the product. Price Elasticity of demand mans responsive of the consumer towards product when there is a change in the price of the product. Price Elastic of Demand = % Change in demand / % Change in Price. The firm needs to consider aspects of their pricing whether they want to aim for a large market share with a low price. In this case they would want to consider market penetration as a pricing strategy. This would mean setting a low price (and correspondingly lower profit margin on each unit), but selling a higher volume. This depends considerably on whether the product is elastic in demand. If the product of the firm is highly elastic, any increase of the product will affects its sales in the market. For example when a firm decides to increase the price of any product which is highly elastic, the consumers demand for the product will decline in the market and in result affects the sales of the product in the market and consequently to the hampers the profit of the firm. If the product is highly inelastic the consumer usually doesnt respond to any increase or increase in the price of the product in the market. So if the firm increases the price of an inelastic product, it does not af fect the sales of the product significantly but on other hand it increases the sales revenue of that product. It should be kept in mind that high sales revenue does not necessarily mean high profit. The firm has to decide at what price the firm will attain maximize profit (when marginal revenue = marginal cost). Income Elasticity of Demand The income elasticity for a firms product is a crucial force of the farms success (profit) at different stages of business cycle. During the period of economic boom incomes are raising and demands for various products including the firms product increases in the market. As a result revenue of the firm increases and consequently firm generates profit from the product. During period of economic recession, it affects the sales performances of almost all industries across the broad as incomes of the consumptions decrease. The firms product does not find demand in the market. It leads to price reduction and lower sales revenue of the firm. Firms also have to incur various costs on marketing and advertising to woo customers. As a result profit of the firm suffered. Income Elasticity can be either positive or negative when income elasticity in negative, an increase in income is associated with a decrease in the quantity demanded of the good or service. Firms producing cheap goods, its profit is adversely affected when incomes of its targeted customers increase. The consumers switch over to better goods when their income increases and consequently sales of the firm affected adversely and so the profit. Similarly income elasticity is positive but less than or equal to the percentage change in income. Such goods and services referred to, as necessities demand for those goods is not longer affected by change in income. The sales of essential goods is generally unaffected by change in income of consumers and its profit depend on its pricing policy. But it must be remembered that government regulates directly or indirectly prices of essential goods in the market. In case of luxury goods the change in demand is proportionately greater than the change i n income. As individuals become richer, they have more income to spend or luxurious products and services. The sales of luxurious goods increases, as incomes of the consumers increase in the economy and it favorable affects the profitability of the firm. Labour Productivity and Profit Improving productivity is the most direct way to increase productivity. In business particularly in manufacturing industry wages of labour is a large share of cost production. Improved labour productivity curtails costs of manufacturing come primarily from. Improved productivity reflects two types of activity changes: Fewer people doing the same amount of work (due to automation and capital substitution), and reducing the number of employees necessary to reach a given level of sales (due to increases in labor productivity). In other words, greater labor productivity reduces the costs of operation for a given level of production, distribution, sales, makes it feasible to make higher profits from the business. Rapid productivity growth allows businesses to pad profits or boost pay without facing a need to raise prices for their products or services. As productivity slows, profit margins could erode unless businesses pass along their increased production costs to consumers. Profit shari ng is a form of labor compensation in which the employees get higher wages when company profits are higher. The idea is that profit sharing increases the incentive to work harder and work smarter, and thus increases profits. On the whole, the studies confirm this, showing that there is at least some scope for increasing profits through the productivity effect. Now let us assume that the firm introduces a new system of working that leads to a rise in output per worker from 2000 to 2500 per year. It may not necessarily imply that the workers are working harder; it could be that they are working smarter. Cell production for example, is one way in which waste can be reduced in terms of time spent moving units from one part of a factory to another and from one worker to another. It could be that the firm has invested in machinery that is more efficient or has reorganized the production line in some way. Of course, the workers might want extra money in return for these changing working practices so let us assume that they have been offered a pay rise of 5% taking their annual salary to $15,750 per year. The total cost of labour is now 50 x $15,750 = Â £787,500. Output however has risen from 100,000 to 125,000. The cost per unit therefore is now $6.30. Even if the firm continues to sell its product at the same price as before it has increased its profit margin. The purpose of the business is to maximize profits. But that’s not the purpose for other stakeholders—for customers, employees, suppliers, and the community. Each of those groups will define the purpose of the business in terms of its own needs and desires, and each perspective is valid and legitimate. It is also simply good business for a company to cater to its customers, train and retain its employees, build long-term positive relationships with its suppliers, and become a good citizen in its community, including performing some philanthropic activity. The business organization should deal with all its various constituencies properly in order to maximize long-term shareholder value. Cavanagh G H (1990), American Business Values, Englewood Cliffs, NJ: Prentice Hall Edgar G. Browning and Mark A. Zupan, 2002, Microeconomics: Theory and Applications Seventh Edition, Wiley Publication Friedman M, 1970, The Social Responsibility of Busines is to Increase it Profits, New York Times Magazine Paul M. and Roberts J., Economics, Organization and Management. Englewood Cliffs, NJ, Prentice Hall, 1992. Perloff, J. (2004) Microeconomics, Third Edition, Addison Wesley Longman Robert H. Frank and Ian C. Parker, 2002, Microeconomics and Behaviour, McGraw- Hill Robert Pindyck and Daniel Rubinfeld, 2001, Microeconomics Fifth Edition, Prentice Hall Sharon O., 1999, Modern Competitive Analysis. 3d ed. New York, Oxford University Press, 1999.

A Summary on the Essay of Kate Gubata: The New Feminism

The word feminism has generally and categorically been associated to an assembly and movements of radical groups who try to eradicate the male dominance in society, talking if not shouting, just to get their messages across.   These were the women in our grandparents’ time who have endeavored and strived to get their equal rights as a human being.   Today, it has been observed that women try to keep away from becoming branded as feminist to disassociate themselves to this type of bloc.   Feminism does not have to be exclusively defined to this category.According to Gubata (2003), a lack of interest among women to engage themselves in these activities is due to the misconceptions on the aims of feminism.   The real goal of the feminists’ today is to elucidate both men and women to convert equality into a reality. Anyone can be an active participant on this action and tackle significant feminists’ issues such as pay inequity, recent passage of the â€Å"ab ortion drug† and legal battles of homosexual marriage.Contemporary feminists are those people who have no fear in speaking their minds and in sharing their ideas as well as being open to ideas of others.   Women should not deny themselves the prospect of getting themselves involved in something they believe in.   Having a united voice means getting the aim stridently heard.The author emphasized on the encouragement of the people to get themselves involved in promoting the goals of feminists.   Take note of the groups in your community which you might get interested in then once you find it, enlist yourself and be prepared to take action.   You may have dissimilar and diverse feminist perceptions in the group but the eventuality of accomplishing your purpose is more apparent.REFERENCEMcCuen-Metherell, J.R. & Winkler, A.C. (Eds.).   (2003). Readings for Writers (11th ed.).  Heinle-Thomson Learning.

Boutique Managment System

1. Boutique Management SystemThe purpose of Boutique Management system is to implement the computerization of the clothes inventory and sales etc. BMS (Boutique Management System) that designed to manage your boutique is very user friendly software. With this software, you can generate report based on your preference (daily, weekly, monthly, or yearly).Scope:-BMS (Boutique Management System) should be designed to manage your boutique in a very user friendly way. With this software, you should generate report based on your preference (daily, weekly, monthly, or yearly). The program consists of the following modules:Source listing This module is supposed to identify the products by their discription. Add products This module is supposed to take the inputs from an input device. Add customers This module is capable of adding customers in the specified formats. Update and delete products This module will update and delete products. Update and delete customers This module will be able to u pdate and delete customers SearchingIn this module the admin or employee can search the customer or products from the database based on criteria’s TransactionsThis module will take up transactions like selling products, buying products from supplier updating cash and updating the bills. Appropriate actions will be taken.Report GenerationThis is a client program which will request for reports. 1). Registration of any new product 2) Functional specification for SearchThe search should be a case insensitive search for items which contain the search key word. The search results should display all the items which matched the search criteria. It will return only those items which are up for sale currently. 3) Sell an ItemWhen the user clicks on Sell an item link, then a page comes up which allows the user to do the following: Provide a title for the item and a description of the Item.A text box to put in the price A text box to provide the date.4) Category SearchingWhen the user cl icks on any of the Categories, a new page should open up which shows all the items up for sale in the Category. 5) Buy an Item (Item page)The Item page contains the following:- The title of the Item The Description of the Item The name of the Seller The current price.6) Edit an ItemThe sellers should be able to edit the item. The seller should be able to do the following:- Change Price and description

Enlightenment And Scientific Discovery Of The 17th Century

During the period of enlightenment and scientific discovery of the 17th century, differing concepts of the scientific method emerged. Amongst these, Renà © Descartes and Sir Isaac Newton had some of the more prominent ideologies. Through The Discourse On Method Descartes describes his rules for â€Å"discovering the truth†(Sherman. P.74) based on his mathematical background. Many of these are based on logical deductions and examining individual sections of a hypothesis to determine their truths. A few decades later, Sir Isaac Newton published Mathematical Principles of Natural Philosophy containing the results of his mathematical and scientific work. To arrive at the conclusions, which Newton had, he came up with his â€Å"four rules for arriving at knowledge†(Sherman. P.76). While these methods have had a positive impact on many great minds, the nature of Descartes’s and Newton’s methodologies threatened the church as it promoted critical thinking and in dependence from the Roman Catholic Church. If we were to look at the methods and rationale that both Descartes and Newton used to arrive at their conclusions, we would see many similarities between the two but fundamentally they also have a few differences. In the Mathematical Principles of Natural Philosophy, Newton uses 4 rules to arrive at his conclusions. These rules declare that: â€Å"We are to admit no more causes of natural things than such as are both true and sufficient to explain their appearance† (Sherman. P.76); natural effectsShow MoreRelatedThe Importance of the Scientific Revolution to Europe1176 Words   |  5 Pages What was the Scientific Revolution and why was it so important to Europe? What did the scientific revolution help develop during time? These are some of the questions that many ask themselves when asked to define scientific revolution and enlightenment in the 17th/ 18th century. The terms â€Å"Scientific Revolution† and â€Å"Enlightenment† are used to describe two important phases that Europe came across during the 1500s to the 1800s. The 17th century scientific revolution left a huge impact on Europe leadingRead MoreThe 18th Century Enlightenment1487 Words   |  6 Pages Upon analyzing the contemporaries of the 18th century enlightenment period, it is important to note that the idea of â€Å"change† caused unease and anxiety to settle in. The enlightenment was a European philosophical movement led by philosophers, Kant, Voltaire, Rousseau, Hobbes, and Locke. These thinkers began to question the way of life in the contemporary world and discussed the poten tial of â€Å"man†. Immanuel Kant hypothesized that man is immature and has yet to find his true potential. QuestioningRead MoreEssay on Revolution in Scientific Affairs977 Words   |  4 PagesEurope changed dramatically in the course of the 17th and 18th centuries. In many ways, this change was a result of changes in intellectual’s approach to natural history, or science. This revolution in scientific affairs, sparked by thinkers like Bacon, Newton, and Descartes, resulted in a significant upheaval in the arts and literature of Europe. Research into this spread of scientific thinking, which would eventually come to influence ideas about such wildly disparate fields of human endeavorRead MoreAge Of Reason And The Scientific Revolution1089 Words   |  5 Pagesin the late 1700s. This can be categorized into two different time periods. First, was the Scientific Revolution when many scholars created new ways of thinking about the natural world. The Scientific Revolution ended around the late 1600s. Although this time period was over, common ideas spread to the next period. The second time period in the Age of Reason was the Enlightenment. The Enlightenment was when scholars and philosophers started to reevaluate old aspects of society and how it functionsRead MoreThe Impact Of The Scientific Revolution And The Age Of Enlightenment1117 Words   |  5 PagesThe period between 1600-1800 was a time of drastic and influential change that would impact Europe as well as the rest of the world for years to come. The s cientific revolution and the Age of Enlightenment were times of infinite ideas, perhaps the most important one being that everything in the universe could be explained rationally. This led to reformation in almost every aspect of life to include, science, culture, economics, religion, politics and even inspired actual revolutions. The incessantRead MoreThe French Revolution And The Enlightenment1471 Words   |  6 Pageshistory, the 18th century marks a change in time. The age old traditions of the Ancient Regime and Catholic Church will see a shift in power. Power now in the hands of the people. Through bloodshed, the radical actions of the French Revolution sparked by philosophies of Enlightenment, will impact the future. Historical figures such as Robespierre heading the Great Assembly will drive change in culture through the revolution, in hopes of achieving enlightened societies. The 18th century marks the beginningRead MoreEuropean Exploration : The Age Of Discovery1128 Wor ds   |  5 PagesEuropean states decided to partake in global explorations in the early fifteenth century. By doing so, this opened up a new chapter in world history, known as the Age of Discovery. During this time, Europe expanded to the Americas, Africa, and the Far East being the first orbit around the world. â€Å"Profound misconceptions about geography and the cultures of local populations would change very slowly throughout he early centuries of European exploration.† (The Saylor Foundation The European Voyages of Exploration:Read MoreAge of Enlightenment: Revolutionary Viewpoints Spreading Essay830 Words   |  4 PagesThe age of enlightenment is a term used to describe a time in Western philosophy and cultural life centered upon the late 17th and 18th century. (wikipedia.com) When the word enlightenment comes to mind your first thought is of change for the better. A time of prosperity and success within a country. Several individuals have been credited and blamed for leading and contributing to the Enlightenment. These thinkers not only changed their views, but also spread revolutionary ideas to others. TheseRead MoreAdvancements During The 18th Century1245 Words   |  5 PagesDBQ Essay During the 18th century, advancements to European thought commenced being wide spread throughout the continent. These advancements, known as the Enlightenment, urged Europeans to look beyond what they had previously known and to expand their knowledge, in order to reform their societies in political and economic matters. Enlightenment thinkers believed in human ability to understand the world in which they lived and to conform it to their needs. They advocated many methods of economicRead MoreThe World s Most Loved Sources Of Caffeine1320 Words   |  6 Pagesberries were chewed for a long time by many cultures, the Yemenites were the first to make them into a drink. Coffee and coffeehouses had soon spread throughout the Arab world and by the 17th century, European travelers began to notice coffeehouses’ role as places of meeting and discussion. Within half a century, coffee was approved for Christian consumption by Pope Clement VIII and it quickly spread throughout Europe. Coffee later became a significant part of the life of scholars, businessmen, and