Why is Profit Important?
In most businesses profit is the reward that the owners of the business want to achieve from taking risks and making investments.
Without the possibility of earning a profit, what would the incentive be to take risks by, for example, setting up a new business, or investing capital to expand an existing business?
Profit, like the positive cash flows that it helps create, can be seen as the lifeblood of a successful and valuable business. A business that fails to achieve profit and instead suffers sustained losses will struggle to survive.
The profit incentive is strong in nearly all businesses, although as you will discover when studying corporate social responsibility, earning a profit is now often seen as just one part of the responsibilities of business. In Elkington's Triple Bottom Line model, for example, you'll discover that Profit is seen as part of a group of three key performance indicators for business activity alongside People and Planet.