Profit is the primary measure of success for businesses in a capitalist system. It is the reward earned by entrepreneurs for their contribution to the production process. While maximizing profit is the theoretical goal, in practice firms often limit profits and have other goals as well, such as maintaining goodwill, avoiding high taxes, and managing risk. Forecasting future profits requires considering factors like sales, costs, competition, technology changes, and general business conditions.

1.  Profit is a reward to the
entrepreneur who is the king pin of
business activity.
 The theory of profit seeks to
explain “why do entrepreneur earn
profit it’s.

2.  In capitalist system, profit is the
primary measure of the success of
a business firm. Profit is the
reward earned by entrepreneur for
his contribution to the process of
production.

3.  To be of service to to be good to
to help on to benefit to advantage
to avail to aid as truth profits all
men.

4.  Profit is the earning of an entrepreneur to
the economist the most significant point
about profit is that it is a residual income.
In the accounting sense, when
total cost is subtracted from total revenue or
total sales receipts of the firm, the residual is
termed as profit.
PROFIT = TR-TC

5.  In practice firms rarely seeks to maximize
profits. Most firms have many goals of
primary importance other than instead of
maximization of profit. Thus, the firms are
interested in putting a limit on their profits.
There are several reasons for controlling
profits.

6.  maintaining of bussiness goodwill
 wage consideration
 Avoiding high taxation and governments
intervention.
 Avoiding risk
 Goal of domination and leadership in market
 Enlightened self-interest of survival
 Liquidity preference

7.  The signs of a healthy business includes
making a profit consistent with the various
risks that it has to face. A firm is faced with
a number of uncertainties. These
uncertainties are created by the dynamic
nature of consumer needs. The
uncontrollable nature of most elements of
cost and the continuous technological
development.

8.  The nature of competition may be related to
either product or price or both
simultaneously product competition is more
important till the product reaches the stage
of maturity. Price competition begins after
the product is established and reaches the
maturity stage. The degree of risk involved
in product competition is greater than in
price competition.

9.  Continuous technological improvements
may make today’s established commercial
production completely obsolete in course of
time. If an improved process is available sa
firm can limit it’s risk by discarding it’s
fixed investment. However, if it does not
have access to the improved process. It may
go out of business altogether.

10.  Profitplanning can’t be done
without proper profit forecasting.
Profit forecasting means
projection of future earnings
taking into consideration all the
factors of affecting the size of
business profits.

11.  JoelDean has pointed out three
approaches of profit forecasting.
 Spot projection
 Break even analysis
 Environmental analysis

12.  Projecting the entire profit and loss
statement for a specified period by
forecasting each important elements
separately, forecasts are made about
sales and prices or costs of producing
the anticipated sales.

13.  Analysis identifying functional
relations both revenues and costs to
output rate with profit related to
output as a residual or alternatively
relating to output directly by the usual
data used in break even analysis.

14.  Analysis relating to the company’s profits
to key variables in the environment such as
the general business activity. and the
general price level. These variables are
external to the company
In fact factors that control
profits have tendency to move in regular
and related patterns rate of output, prices,
wages, material costs and efficiency are all
interrelated by their interactions in
aggregate business activity.

15. Presented by
MBA- 1 SEM TINKU YADAV