Profit plays an important role in the existence of business due to the following reasons:
It helps the business to continue to exist in the market, by meeting the expenses.
2. Expansion and growth:
Profit helps the business to increase the scale of its operations and then grow to the new heights.
3. Index of performance:
Profit is used to judge the performance and efficiency of the business, as more profits indicate better performance and increased efficiency.
4. Reward for bearing risk:
Since no business can exist without risk, the burden of bearing risk is compensated and justified by earning profits.
5. Creation of goodwill:
By earning profits business is able to build reputation in the market and attract new parties like employees, customers, investors etc.