Hi,
The answer is one liner:
"No profit, No reason for an organization to exist" (unless its an NGO) :)
Regards,
Adam
Profits are not cash but require to be sustained for a number of reasons depending on the type of company. These can include:-
(1) Ability to pay shareholders a dividend (assuming cash is there)
(2) Ability to re-invest in replacement of fixed assets (depreciation is provided for this)
(3) Ability to invest in business growth (marketing, better developed people)
(4) Ability to persuade banks that sustainable profits will lead to positive cash flows for lending purposes
(5) To impress businesses who wish to acquire your company
(6) To motivate management & staff (provide security & maybe bonuses)
(7) To demonstrate the Company is being managed professionally
Without profits an organization will eventually run out of money and therefore no longer capable of running the business.
Investors in a business look for a return on their investment(ROI) which is the profit of a business. Without that, why would anyone want to invest in that business.
how profit are important to an organisation
