SlideShare a Scribd company logo
Business & Profits 
and its Role in 
Society
A business (also called a company, enterprise or firm) is a 
legally recognized organization designed to provide goods 
and/or services to consumers. Business are predominant in 
capitalist economies. Most businesses are privately owned. 
A business is typically owned and formed to earn profit that 
will increase the wealth of its owners and grow the business 
itself. The owners and operators of a business have one 
main objectives i.e receipt or generation of a financial 
return in exchange of work and acceptance of risk. Notable 
exceptions include cooperative enterprises. Businesses can 
also be formed not-for-profit or be state owned. 
Background
Gross Profit = Sales Revenue (Less) Cost of Goods Sold 
(COGS),thus removing only the part of expenses that can be 
traced directly to the production of the goods. Gross profit still 
includes general (overhead) expenses like R&D,S&M,G&A, also 
interest expenses ,taxes and extraordinary items. 
Operating Profit = Gross Profit (less) all operating expenses. 
This is the surplus generated by operations. It is also known as 
Earnings Before Interest and Taxes EBIT , Operating Profit 
Before Interest and Taxes OPBIT or simply Profit Before 
Interest and Taxes PBIT 
Different Measures of 
Profit in a firm
Net Profit = Profit After Tax (unless some distinction about the 
treatment of extraordinary expenses is made).In the US the Term 
Net Income is commonly used. Income Before Extraordinary 
Expenses represents the same but before adjusting for 
extraordinary items. 
Net income (less) dividends becomes retained earnings. 
There are several additional important profit measures, notably 
EBITDA and NOPAT. 
To accountants, economic profit or EP , is a single-period metric 
to determine the value created by a company in one period 
usually a year. 
Different Measures of 
Profit in a firm
(Net) Profit Before Tax PBT equals operating profit less 
interest expenses (but before taxes).It is also know as 
Earnings Before Interest EBT, Net operating income before 
taxes or simply Pretax Income. 
Some economists define further types of profit: 
• Abnormal profit (or supernormal profit) 
• Subnormal profit 
• Monopoly profit (super profit) 
Optimum Profit: This is the “right amount” of profit a 
business can achieve. In business, this figure takes account 
of marketing strategy ,market position, and other methods 
of increasing returns above the competitive rate. 
Different Measures of Profit in a firm
Organization Approach towards….. 
Shareholder Stakeholder 
1.Narrow Focus, driven by numbers 
and things that have been qualified and 
measured 
Sustainable, competitive thinking that 
tends to be visionary 
2.Executive Management may react to 
valuations in dramatic ways (merger, 
layoffs, etc.) 
Multi-view of the organization 
regardless if it is quantifiable. 
3.Performance evaluation tends to be 
financially focused with little 
emphasis on intangible drivers of 
performance. 
Performance evaluation follow 
strategic issues, not just operations. 
4.Sources of value tend to be isolated 
systems, fragmented and not coherent. 
Strong value systems across the entire 
value-chain, extending to external 
stakeholder. 
5.Slow to respond to change; new 
ideas are not easily understood. 
Easy flow of new ideas and innovation 
(very change oriented) 
Shareholder & Stakeholder view of 
Profit 
6.Management tends to quickly 
embrace a quick fix solution, 
sometimes adopting the latest fad 
despite the fact that it may not fit or it 
is not well-tested. 
Management does not embrace quick 
fix solutions; instead opting to avoid 
paying a heavy price.
Shareholder Stakeholder 
7.People who create value may be 
viewed as “too radical” and somewhat 
out-of-step. 
People who create value are most 
likely to advance within the 
organization. 
8.The bottom line focus is earnings. The bottom line focus is on value – 
what value are we adding. 
9.Traditional Approaches to growth – 
allocate resources to marketing 
,acquire other companies ,control 
costs, etc. 
Growth through the intangibles – 
relationships, competitiveness 
,knowledge workers; thinking in terms 
of opportunities for growing the 
business around core competencies. 
10.Business success is what we create 
for our shareholders. 
Business success is what we create for 
all stakeholders, not just shareholders.
A shareholder is the part-owner of the enterprise or company and such 
he is interested in maximizing his profits. On the other hand the 
stakeholders are the one’s who have a stake in the company and they 
are the following. 
1. Shareholders 
2. Long Term Lenders 
3. Employees 
4. Distributors 
5. Customers 
6. Regulatory 
7. Government 
All the stakeholders have different expectations from their company or 
enterprise. The shareholder’s want to maximize profits and their 
dividend where as the long term lenders want to ensure safety of their 
money and timely payment of interest. On the other hand, the customer 
wants a competitive price and good quality and the distributor wants 
timely payment. Regulatory authorities want to ensure that the 
enterprise is running as per the laws of the land and the government 
wants to see that they get revenue from the business houses.
The basic objectives of businesses is to develop, produce and 
supply goods and services to customers. This has to be done 
in such a way as to allow companies to make a profit, which 
in turn demands far more than just skills in companies’ own 
fields and processes. Companies improve their resources by 
developing material and ideas. The goods and services 
produced must see demands made by customer. 
For example, Maggie Noodles of Nestle was a instant hit as it 
has created time value for the modern working housewife as 
she could make something to eat in 2 min time. 
Role of business
1. Supplying goods and services that customer cannot ,or do not 
want to ,produce themselves 
2. Creating jobs for customers, suppliers, distributors and co-workers. 
3. Entrepreneurs make money to support themselves and their 
families , pay taxes and use their wages to buy goods and 
services. 
4. Continually developing new goods, services and processes. 
5. Investing in new technologies and in the skills of employees. 
6. Building up and spreading international standards, e.g for 
environmental practice. 
7. Spreading “good practice” in different areas,such as the 
environment and workplace safe. 
Businesses/Companies benefits 
society by:
• In fact, considered from all angles, is it unethical, NOT to 
make profit. It is unethical, for a company ,to make losses. 
Because, a company, to make losses , misutilises scares 
national resources, can not pay back creditors ,does not make 
wealth for its shareholders, make huge liabilities, upsets the 
economy, promotes inefficiency and most importantly, can not 
,at any cost discharge social responsibility, meets its welfare 
commitments and jeopardies the future of its employees. Such 
a loss-making company becomes a nuisance and a burden to 
the economy and has no right to exist in the market place. 
Moreover ,it has no right to force its employees into economic 
insecurity, which is highly unethical. 
• No business, however great or strong or wealthy it may be at 
present, can exist on unethical means, or in total disregards to 
its social concern, for very long. Resorting to unethical 
behavior or disregarding social welfare is like calling for its 
own doom. 
Profits Not An Ethical Word.
• The Triple bottom line (abbr. TBL or 3BL) and also know as 
“People,Planet,Profit”. Captures an expanded spectrum of values 
and criteria for measuring organizational (and societal) success: 
economic, ecological and social. 
• The concept of TBL demands a company’s responsibility to be 
stakeholders rather than shareholders. In this case 
“stakeholders” refers to anyone who is influenced, either 
directly or indirectly by the action of the firm. According to the 
shareholder theory ,the business entity should be used as a 
vehicle for coordinating stakeholder interests, instead of 
maximizing shareholder (owner) profit. 
Triple Bottom line Concept for measuring 
Organizational Success
“People” (Human capital) pertains to fair and beneficial business 
practices toward labor and the community and region in which a 
corporation conducts its business. A TBL company conceives a 
reciprocal social structure in which the well-being of corporate 
labor and other stakeholder interests are independent. 
“Planet” (Natural capital) refers to sustainable environmental 
practices. A TBL company endeavors to benefit the natural order 
as much as possible or at the least do no harm and curtail 
environmental impact. 
“Profit” is the economic value created by the organization after 
deducting the cost of all inputs, including the cost of the capital 
tied up. In the original concept, within a sustainability 
framework, the “profit” aspects needs to be seen as the real 
economic benefit enjoyed by the host society. 
People, Planet and Profit
• Long Answer Questions : 
Business is related to making profit, whereas Ethics deal 
with right or wrong. Therefore business and ethics is not 
related to each other. Discuss (Oct.10) 
What do we mean by Business Ethics and what are the roles 
and responsibilities of various stake holder in it? (Oct.10) 
• Short Note : What is Triple Bottom Line – Explain the 
term. (March 11) 
Questions

More Related Content

What's hot

Business economics
Business economicsBusiness economics
Business economics
Ashutosh Mittal
 
Cost Output Relationship; Estimation of Cost and Output
Cost Output Relationship; Estimation of Cost and OutputCost Output Relationship; Estimation of Cost and Output
Cost Output Relationship; Estimation of Cost and Output
Dheeraj Rajput
 
Business activity
Business activityBusiness activity
Business activity
Maria Laura Damelli
 
Market power and pricing
Market power and pricingMarket power and pricing
Market power and pricing
tutor2u
 
Revenue
RevenueRevenue
Revenue
Bikash Kumar
 
Law of demand
Law of demand Law of demand
Law of demand
Shompa Nandi
 
7. consumption function
7. consumption function7. consumption function
7. consumption function
santumane
 
Law of demand
Law of demandLaw of demand
Law of demand
Ankit Porwal
 
Elasticity of Demand
Elasticity of DemandElasticity of Demand
Elasticity of Demand
itutor
 
Business cycle
Business cycleBusiness cycle
Types of cost
Types of costTypes of cost
Types of cost
Dr. C.V. Suresh Babu
 
Economic Problems
Economic ProblemsEconomic Problems
Economic Problems
Vareesha Ali
 
Opportunity cost
Opportunity cost  Opportunity cost
Opportunity cost
Ivan Siananda
 
Theories of-entrepreneurship
Theories of-entrepreneurshipTheories of-entrepreneurship
Theories of-entrepreneurship
shrinivas kulkarni
 
Cross price elasticity of demand
Cross price elasticity of demandCross price elasticity of demand
Cross price elasticity of demand
businesstopia
 
Elasticity of Supply
Elasticity of SupplyElasticity of Supply
Elasticity of Supply
itutor
 
Elasticity Of Demand.Ppt
Elasticity Of Demand.PptElasticity Of Demand.Ppt
Elasticity Of Demand.Ppt
harshalvyas
 
Income and Cross Elasticity
Income and Cross ElasticityIncome and Cross Elasticity
Income and Cross ElasticityManvi Agarwal
 
Fundamental concepts, principle of economics
Fundamental concepts, principle of economicsFundamental concepts, principle of economics
Fundamental concepts, principle of economics
Shompa Nandi
 
Production possibility
Production possibilityProduction possibility
Production possibility
Faith Martin
 

What's hot (20)

Business economics
Business economicsBusiness economics
Business economics
 
Cost Output Relationship; Estimation of Cost and Output
Cost Output Relationship; Estimation of Cost and OutputCost Output Relationship; Estimation of Cost and Output
Cost Output Relationship; Estimation of Cost and Output
 
Business activity
Business activityBusiness activity
Business activity
 
Market power and pricing
Market power and pricingMarket power and pricing
Market power and pricing
 
Revenue
RevenueRevenue
Revenue
 
Law of demand
Law of demand Law of demand
Law of demand
 
7. consumption function
7. consumption function7. consumption function
7. consumption function
 
Law of demand
Law of demandLaw of demand
Law of demand
 
Elasticity of Demand
Elasticity of DemandElasticity of Demand
Elasticity of Demand
 
Business cycle
Business cycleBusiness cycle
Business cycle
 
Types of cost
Types of costTypes of cost
Types of cost
 
Economic Problems
Economic ProblemsEconomic Problems
Economic Problems
 
Opportunity cost
Opportunity cost  Opportunity cost
Opportunity cost
 
Theories of-entrepreneurship
Theories of-entrepreneurshipTheories of-entrepreneurship
Theories of-entrepreneurship
 
Cross price elasticity of demand
Cross price elasticity of demandCross price elasticity of demand
Cross price elasticity of demand
 
Elasticity of Supply
Elasticity of SupplyElasticity of Supply
Elasticity of Supply
 
Elasticity Of Demand.Ppt
Elasticity Of Demand.PptElasticity Of Demand.Ppt
Elasticity Of Demand.Ppt
 
Income and Cross Elasticity
Income and Cross ElasticityIncome and Cross Elasticity
Income and Cross Elasticity
 
Fundamental concepts, principle of economics
Fundamental concepts, principle of economicsFundamental concepts, principle of economics
Fundamental concepts, principle of economics
 
Production possibility
Production possibilityProduction possibility
Production possibility
 

Similar to Business and profits and its role in society

Power point presentation
Power point presentationPower point presentation
Power point presentation
Amit Gupta
 
Unit1 nature of business
Unit1 nature of businessUnit1 nature of business
Unit1 nature of business
Supreet Wahee
 
Business of the business is to do business
Business of the business is to do businessBusiness of the business is to do business
Business of the business is to do business
Anurag Ranjan
 
Journey from a Startup to an enterprise
Journey from a Startup  to an enterpriseJourney from a Startup  to an enterprise
Journey from a Startup to an enterprise
Rajagopalan V
 
Introduction to business finance by Ayesha Noor
Introduction to business finance by Ayesha Noor Introduction to business finance by Ayesha Noor
Introduction to business finance by Ayesha Noor
Ayesha Noor
 
Discussion 1
Discussion 1Discussion 1
Discussion 1
Kaonde Andrew
 
week 5 FORMS-OF-BUSINESS-ORGANIZATIONS.pptx
week 5 FORMS-OF-BUSINESS-ORGANIZATIONS.pptxweek 5 FORMS-OF-BUSINESS-ORGANIZATIONS.pptx
week 5 FORMS-OF-BUSINESS-ORGANIZATIONS.pptx
Jessica371610
 
Business economics chapter 2
Business economics chapter 2Business economics chapter 2
Business economics chapter 2
MidoTami
 
20075ipcc paper7 b_vol1_cp1
20075ipcc paper7 b_vol1_cp120075ipcc paper7 b_vol1_cp1
20075ipcc paper7 b_vol1_cp1
deep2509
 
Chapter 5 business objectives and stakeholders objectives
Chapter 5 business objectives and stakeholders objectivesChapter 5 business objectives and stakeholders objectives
Chapter 5 business objectives and stakeholders objectives
Muhammad Talha
 
Chapter 1
Chapter 1Chapter 1
Chapter 1
NazminTandra
 
CUSTOMER SERVICE: Working in a Business Environment
CUSTOMER SERVICE: Working in a Business EnvironmentCUSTOMER SERVICE: Working in a Business Environment
CUSTOMER SERVICE: Working in a Business Environment
The Pathway Group
 
FM1.docx
FM1.docxFM1.docx
FM1.docx
josephbenson24
 
Business Ethics W1W2.pptx
Business Ethics W1W2.pptxBusiness Ethics W1W2.pptx
Business Ethics W1W2.pptx
NimrodCabrera2
 
ACCT1_Users+of+Accounting.pptx
ACCT1_Users+of+Accounting.pptxACCT1_Users+of+Accounting.pptx
ACCT1_Users+of+Accounting.pptx
LunaLedezma3
 
Bus.ed 1
Bus.ed 1Bus.ed 1
Chapter 5 Business Objectives and stakeholders Objectives.pdf
Chapter 5 Business Objectives and stakeholders Objectives.pdfChapter 5 Business Objectives and stakeholders Objectives.pdf
Chapter 5 Business Objectives and stakeholders Objectives.pdf
tajqaiser
 
Corporate Finance: Basic Concept
Corporate Finance: Basic ConceptCorporate Finance: Basic Concept
Corporate Finance: Basic Concept
Maksudul Huq Chowdhury
 
Unit ii business society - compiled
Unit ii   business   society - compiledUnit ii   business   society - compiled
Unit ii business society - compiled
Naveen Kumar
 
GROUP-1-INTRODUCTION-TO-BUSINESS.pptx
GROUP-1-INTRODUCTION-TO-BUSINESS.pptxGROUP-1-INTRODUCTION-TO-BUSINESS.pptx
GROUP-1-INTRODUCTION-TO-BUSINESS.pptx
GlenChrisCasimiro
 

Similar to Business and profits and its role in society (20)

Power point presentation
Power point presentationPower point presentation
Power point presentation
 
Unit1 nature of business
Unit1 nature of businessUnit1 nature of business
Unit1 nature of business
 
Business of the business is to do business
Business of the business is to do businessBusiness of the business is to do business
Business of the business is to do business
 
Journey from a Startup to an enterprise
Journey from a Startup  to an enterpriseJourney from a Startup  to an enterprise
Journey from a Startup to an enterprise
 
Introduction to business finance by Ayesha Noor
Introduction to business finance by Ayesha Noor Introduction to business finance by Ayesha Noor
Introduction to business finance by Ayesha Noor
 
Discussion 1
Discussion 1Discussion 1
Discussion 1
 
week 5 FORMS-OF-BUSINESS-ORGANIZATIONS.pptx
week 5 FORMS-OF-BUSINESS-ORGANIZATIONS.pptxweek 5 FORMS-OF-BUSINESS-ORGANIZATIONS.pptx
week 5 FORMS-OF-BUSINESS-ORGANIZATIONS.pptx
 
Business economics chapter 2
Business economics chapter 2Business economics chapter 2
Business economics chapter 2
 
20075ipcc paper7 b_vol1_cp1
20075ipcc paper7 b_vol1_cp120075ipcc paper7 b_vol1_cp1
20075ipcc paper7 b_vol1_cp1
 
Chapter 5 business objectives and stakeholders objectives
Chapter 5 business objectives and stakeholders objectivesChapter 5 business objectives and stakeholders objectives
Chapter 5 business objectives and stakeholders objectives
 
Chapter 1
Chapter 1Chapter 1
Chapter 1
 
CUSTOMER SERVICE: Working in a Business Environment
CUSTOMER SERVICE: Working in a Business EnvironmentCUSTOMER SERVICE: Working in a Business Environment
CUSTOMER SERVICE: Working in a Business Environment
 
FM1.docx
FM1.docxFM1.docx
FM1.docx
 
Business Ethics W1W2.pptx
Business Ethics W1W2.pptxBusiness Ethics W1W2.pptx
Business Ethics W1W2.pptx
 
ACCT1_Users+of+Accounting.pptx
ACCT1_Users+of+Accounting.pptxACCT1_Users+of+Accounting.pptx
ACCT1_Users+of+Accounting.pptx
 
Bus.ed 1
Bus.ed 1Bus.ed 1
Bus.ed 1
 
Chapter 5 Business Objectives and stakeholders Objectives.pdf
Chapter 5 Business Objectives and stakeholders Objectives.pdfChapter 5 Business Objectives and stakeholders Objectives.pdf
Chapter 5 Business Objectives and stakeholders Objectives.pdf
 
Corporate Finance: Basic Concept
Corporate Finance: Basic ConceptCorporate Finance: Basic Concept
Corporate Finance: Basic Concept
 
Unit ii business society - compiled
Unit ii   business   society - compiledUnit ii   business   society - compiled
Unit ii business society - compiled
 
GROUP-1-INTRODUCTION-TO-BUSINESS.pptx
GROUP-1-INTRODUCTION-TO-BUSINESS.pptxGROUP-1-INTRODUCTION-TO-BUSINESS.pptx
GROUP-1-INTRODUCTION-TO-BUSINESS.pptx
 

Recently uploaded

Enriching engagement with ethical review processes
Enriching engagement with ethical review processesEnriching engagement with ethical review processes
Enriching engagement with ethical review processes
strikingabalance
 
Team Building and TUCKMANS MODEL Explained
Team Building and TUCKMANS MODEL ExplainedTeam Building and TUCKMANS MODEL Explained
Team Building and TUCKMANS MODEL Explained
iampriyanshujaiswal
 
innovation in nursing practice, education and management.pptx
innovation in nursing practice, education and management.pptxinnovation in nursing practice, education and management.pptx
innovation in nursing practice, education and management.pptx
TulsiDhidhi1
 
20240608 QFM019 Engineering Leadership Reading List May 2024
20240608 QFM019 Engineering Leadership Reading List May 202420240608 QFM019 Engineering Leadership Reading List May 2024
20240608 QFM019 Engineering Leadership Reading List May 2024
Matthew Sinclair
 
All the Small Things - XP2024 Bolzano/Bozen
All the Small Things - XP2024 Bolzano/BozenAll the Small Things - XP2024 Bolzano/Bozen
All the Small Things - XP2024 Bolzano/Bozen
Alberto Brandolini
 
Impact of Effective Performance Appraisal Systems on Employee Motivation and ...
Impact of Effective Performance Appraisal Systems on Employee Motivation and ...Impact of Effective Performance Appraisal Systems on Employee Motivation and ...
Impact of Effective Performance Appraisal Systems on Employee Motivation and ...
Dr. Nazrul Islam
 
Strategic Org Design with Org Topologies™
Strategic Org Design with Org Topologies™Strategic Org Design with Org Topologies™
Strategic Org Design with Org Topologies™
Alexey Krivitsky
 
Conflict resololution,role of hr in resolution
Conflict resololution,role of hr in resolutionConflict resololution,role of hr in resolution
Conflict resololution,role of hr in resolution
Dr. Christine Ngari ,Ph.D (HRM)
 
Addiction to Winning Across Diverse Populations.pdf
Addiction to Winning Across Diverse Populations.pdfAddiction to Winning Across Diverse Populations.pdf
Addiction to Winning Across Diverse Populations.pdf
Bill641377
 
Colby Hobson: Residential Construction Leader Building a Solid Reputation Thr...
Colby Hobson: Residential Construction Leader Building a Solid Reputation Thr...Colby Hobson: Residential Construction Leader Building a Solid Reputation Thr...
Colby Hobson: Residential Construction Leader Building a Solid Reputation Thr...
dsnow9802
 
Designing and Sustaining Large-Scale Value-Centered Agile Ecosystems (powered...
Designing and Sustaining Large-Scale Value-Centered Agile Ecosystems (powered...Designing and Sustaining Large-Scale Value-Centered Agile Ecosystems (powered...
Designing and Sustaining Large-Scale Value-Centered Agile Ecosystems (powered...
Alexey Krivitsky
 
Ganpati Kumar Choudhary Indian Ethos PPT.pptx
Ganpati Kumar Choudhary Indian Ethos PPT.pptxGanpati Kumar Choudhary Indian Ethos PPT.pptx
Ganpati Kumar Choudhary Indian Ethos PPT.pptx
GanpatiKumarChoudhar
 
Comparing Stability and Sustainability in Agile Systems
Comparing Stability and Sustainability in Agile SystemsComparing Stability and Sustainability in Agile Systems
Comparing Stability and Sustainability in Agile Systems
Rob Healy
 
The Management Guide: From Projects to Portfolio
The Management Guide: From Projects to PortfolioThe Management Guide: From Projects to Portfolio
The Management Guide: From Projects to Portfolio
Ahmed AbdelMoneim
 
Chart--Time Management.pdf How to time is spent
Chart--Time Management.pdf How to time is spentChart--Time Management.pdf How to time is spent
Chart--Time Management.pdf How to time is spent
spandane
 
一比一原版(QU毕业证)皇后大学毕业证如何办理
一比一原版(QU毕业证)皇后大学毕业证如何办理一比一原版(QU毕业证)皇后大学毕业证如何办理
一比一原版(QU毕业证)皇后大学毕业证如何办理
8p28uk6g
 
12 steps to transform your organization into the agile org you deserve
12 steps to transform your organization into the agile org you deserve12 steps to transform your organization into the agile org you deserve
12 steps to transform your organization into the agile org you deserve
Pierre E. NEIS
 
Myrna Story of Leadership and Management
Myrna Story of Leadership and ManagementMyrna Story of Leadership and Management
Myrna Story of Leadership and Management
Waleed Kamal
 
Stuart Wilson the teams I have led - 2024
Stuart Wilson the teams I have led - 2024Stuart Wilson the teams I have led - 2024
Stuart Wilson the teams I have led - 2024
stuwilson.co.uk
 
Sethurathnam Ravi: A Legacy in Finance and Leadership
Sethurathnam Ravi: A Legacy in Finance and LeadershipSethurathnam Ravi: A Legacy in Finance and Leadership
Sethurathnam Ravi: A Legacy in Finance and Leadership
Anjana Josie
 

Recently uploaded (20)

Enriching engagement with ethical review processes
Enriching engagement with ethical review processesEnriching engagement with ethical review processes
Enriching engagement with ethical review processes
 
Team Building and TUCKMANS MODEL Explained
Team Building and TUCKMANS MODEL ExplainedTeam Building and TUCKMANS MODEL Explained
Team Building and TUCKMANS MODEL Explained
 
innovation in nursing practice, education and management.pptx
innovation in nursing practice, education and management.pptxinnovation in nursing practice, education and management.pptx
innovation in nursing practice, education and management.pptx
 
20240608 QFM019 Engineering Leadership Reading List May 2024
20240608 QFM019 Engineering Leadership Reading List May 202420240608 QFM019 Engineering Leadership Reading List May 2024
20240608 QFM019 Engineering Leadership Reading List May 2024
 
All the Small Things - XP2024 Bolzano/Bozen
All the Small Things - XP2024 Bolzano/BozenAll the Small Things - XP2024 Bolzano/Bozen
All the Small Things - XP2024 Bolzano/Bozen
 
Impact of Effective Performance Appraisal Systems on Employee Motivation and ...
Impact of Effective Performance Appraisal Systems on Employee Motivation and ...Impact of Effective Performance Appraisal Systems on Employee Motivation and ...
Impact of Effective Performance Appraisal Systems on Employee Motivation and ...
 
Strategic Org Design with Org Topologies™
Strategic Org Design with Org Topologies™Strategic Org Design with Org Topologies™
Strategic Org Design with Org Topologies™
 
Conflict resololution,role of hr in resolution
Conflict resololution,role of hr in resolutionConflict resololution,role of hr in resolution
Conflict resololution,role of hr in resolution
 
Addiction to Winning Across Diverse Populations.pdf
Addiction to Winning Across Diverse Populations.pdfAddiction to Winning Across Diverse Populations.pdf
Addiction to Winning Across Diverse Populations.pdf
 
Colby Hobson: Residential Construction Leader Building a Solid Reputation Thr...
Colby Hobson: Residential Construction Leader Building a Solid Reputation Thr...Colby Hobson: Residential Construction Leader Building a Solid Reputation Thr...
Colby Hobson: Residential Construction Leader Building a Solid Reputation Thr...
 
Designing and Sustaining Large-Scale Value-Centered Agile Ecosystems (powered...
Designing and Sustaining Large-Scale Value-Centered Agile Ecosystems (powered...Designing and Sustaining Large-Scale Value-Centered Agile Ecosystems (powered...
Designing and Sustaining Large-Scale Value-Centered Agile Ecosystems (powered...
 
Ganpati Kumar Choudhary Indian Ethos PPT.pptx
Ganpati Kumar Choudhary Indian Ethos PPT.pptxGanpati Kumar Choudhary Indian Ethos PPT.pptx
Ganpati Kumar Choudhary Indian Ethos PPT.pptx
 
Comparing Stability and Sustainability in Agile Systems
Comparing Stability and Sustainability in Agile SystemsComparing Stability and Sustainability in Agile Systems
Comparing Stability and Sustainability in Agile Systems
 
The Management Guide: From Projects to Portfolio
The Management Guide: From Projects to PortfolioThe Management Guide: From Projects to Portfolio
The Management Guide: From Projects to Portfolio
 
Chart--Time Management.pdf How to time is spent
Chart--Time Management.pdf How to time is spentChart--Time Management.pdf How to time is spent
Chart--Time Management.pdf How to time is spent
 
一比一原版(QU毕业证)皇后大学毕业证如何办理
一比一原版(QU毕业证)皇后大学毕业证如何办理一比一原版(QU毕业证)皇后大学毕业证如何办理
一比一原版(QU毕业证)皇后大学毕业证如何办理
 
12 steps to transform your organization into the agile org you deserve
12 steps to transform your organization into the agile org you deserve12 steps to transform your organization into the agile org you deserve
12 steps to transform your organization into the agile org you deserve
 
Myrna Story of Leadership and Management
Myrna Story of Leadership and ManagementMyrna Story of Leadership and Management
Myrna Story of Leadership and Management
 
Stuart Wilson the teams I have led - 2024
Stuart Wilson the teams I have led - 2024Stuart Wilson the teams I have led - 2024
Stuart Wilson the teams I have led - 2024
 
Sethurathnam Ravi: A Legacy in Finance and Leadership
Sethurathnam Ravi: A Legacy in Finance and LeadershipSethurathnam Ravi: A Legacy in Finance and Leadership
Sethurathnam Ravi: A Legacy in Finance and Leadership
 

Business and profits and its role in society

  • 1. Business & Profits and its Role in Society
  • 2. A business (also called a company, enterprise or firm) is a legally recognized organization designed to provide goods and/or services to consumers. Business are predominant in capitalist economies. Most businesses are privately owned. A business is typically owned and formed to earn profit that will increase the wealth of its owners and grow the business itself. The owners and operators of a business have one main objectives i.e receipt or generation of a financial return in exchange of work and acceptance of risk. Notable exceptions include cooperative enterprises. Businesses can also be formed not-for-profit or be state owned. Background
  • 3. Gross Profit = Sales Revenue (Less) Cost of Goods Sold (COGS),thus removing only the part of expenses that can be traced directly to the production of the goods. Gross profit still includes general (overhead) expenses like R&D,S&M,G&A, also interest expenses ,taxes and extraordinary items. Operating Profit = Gross Profit (less) all operating expenses. This is the surplus generated by operations. It is also known as Earnings Before Interest and Taxes EBIT , Operating Profit Before Interest and Taxes OPBIT or simply Profit Before Interest and Taxes PBIT Different Measures of Profit in a firm
  • 4. Net Profit = Profit After Tax (unless some distinction about the treatment of extraordinary expenses is made).In the US the Term Net Income is commonly used. Income Before Extraordinary Expenses represents the same but before adjusting for extraordinary items. Net income (less) dividends becomes retained earnings. There are several additional important profit measures, notably EBITDA and NOPAT. To accountants, economic profit or EP , is a single-period metric to determine the value created by a company in one period usually a year. Different Measures of Profit in a firm
  • 5. (Net) Profit Before Tax PBT equals operating profit less interest expenses (but before taxes).It is also know as Earnings Before Interest EBT, Net operating income before taxes or simply Pretax Income. Some economists define further types of profit: • Abnormal profit (or supernormal profit) • Subnormal profit • Monopoly profit (super profit) Optimum Profit: This is the “right amount” of profit a business can achieve. In business, this figure takes account of marketing strategy ,market position, and other methods of increasing returns above the competitive rate. Different Measures of Profit in a firm
  • 6. Organization Approach towards….. Shareholder Stakeholder 1.Narrow Focus, driven by numbers and things that have been qualified and measured Sustainable, competitive thinking that tends to be visionary 2.Executive Management may react to valuations in dramatic ways (merger, layoffs, etc.) Multi-view of the organization regardless if it is quantifiable. 3.Performance evaluation tends to be financially focused with little emphasis on intangible drivers of performance. Performance evaluation follow strategic issues, not just operations. 4.Sources of value tend to be isolated systems, fragmented and not coherent. Strong value systems across the entire value-chain, extending to external stakeholder. 5.Slow to respond to change; new ideas are not easily understood. Easy flow of new ideas and innovation (very change oriented) Shareholder & Stakeholder view of Profit 6.Management tends to quickly embrace a quick fix solution, sometimes adopting the latest fad despite the fact that it may not fit or it is not well-tested. Management does not embrace quick fix solutions; instead opting to avoid paying a heavy price.
  • 7. Shareholder Stakeholder 7.People who create value may be viewed as “too radical” and somewhat out-of-step. People who create value are most likely to advance within the organization. 8.The bottom line focus is earnings. The bottom line focus is on value – what value are we adding. 9.Traditional Approaches to growth – allocate resources to marketing ,acquire other companies ,control costs, etc. Growth through the intangibles – relationships, competitiveness ,knowledge workers; thinking in terms of opportunities for growing the business around core competencies. 10.Business success is what we create for our shareholders. Business success is what we create for all stakeholders, not just shareholders.
  • 8. A shareholder is the part-owner of the enterprise or company and such he is interested in maximizing his profits. On the other hand the stakeholders are the one’s who have a stake in the company and they are the following. 1. Shareholders 2. Long Term Lenders 3. Employees 4. Distributors 5. Customers 6. Regulatory 7. Government All the stakeholders have different expectations from their company or enterprise. The shareholder’s want to maximize profits and their dividend where as the long term lenders want to ensure safety of their money and timely payment of interest. On the other hand, the customer wants a competitive price and good quality and the distributor wants timely payment. Regulatory authorities want to ensure that the enterprise is running as per the laws of the land and the government wants to see that they get revenue from the business houses.
  • 9. The basic objectives of businesses is to develop, produce and supply goods and services to customers. This has to be done in such a way as to allow companies to make a profit, which in turn demands far more than just skills in companies’ own fields and processes. Companies improve their resources by developing material and ideas. The goods and services produced must see demands made by customer. For example, Maggie Noodles of Nestle was a instant hit as it has created time value for the modern working housewife as she could make something to eat in 2 min time. Role of business
  • 10. 1. Supplying goods and services that customer cannot ,or do not want to ,produce themselves 2. Creating jobs for customers, suppliers, distributors and co-workers. 3. Entrepreneurs make money to support themselves and their families , pay taxes and use their wages to buy goods and services. 4. Continually developing new goods, services and processes. 5. Investing in new technologies and in the skills of employees. 6. Building up and spreading international standards, e.g for environmental practice. 7. Spreading “good practice” in different areas,such as the environment and workplace safe. Businesses/Companies benefits society by:
  • 11. • In fact, considered from all angles, is it unethical, NOT to make profit. It is unethical, for a company ,to make losses. Because, a company, to make losses , misutilises scares national resources, can not pay back creditors ,does not make wealth for its shareholders, make huge liabilities, upsets the economy, promotes inefficiency and most importantly, can not ,at any cost discharge social responsibility, meets its welfare commitments and jeopardies the future of its employees. Such a loss-making company becomes a nuisance and a burden to the economy and has no right to exist in the market place. Moreover ,it has no right to force its employees into economic insecurity, which is highly unethical. • No business, however great or strong or wealthy it may be at present, can exist on unethical means, or in total disregards to its social concern, for very long. Resorting to unethical behavior or disregarding social welfare is like calling for its own doom. Profits Not An Ethical Word.
  • 12. • The Triple bottom line (abbr. TBL or 3BL) and also know as “People,Planet,Profit”. Captures an expanded spectrum of values and criteria for measuring organizational (and societal) success: economic, ecological and social. • The concept of TBL demands a company’s responsibility to be stakeholders rather than shareholders. In this case “stakeholders” refers to anyone who is influenced, either directly or indirectly by the action of the firm. According to the shareholder theory ,the business entity should be used as a vehicle for coordinating stakeholder interests, instead of maximizing shareholder (owner) profit. Triple Bottom line Concept for measuring Organizational Success
  • 13. “People” (Human capital) pertains to fair and beneficial business practices toward labor and the community and region in which a corporation conducts its business. A TBL company conceives a reciprocal social structure in which the well-being of corporate labor and other stakeholder interests are independent. “Planet” (Natural capital) refers to sustainable environmental practices. A TBL company endeavors to benefit the natural order as much as possible or at the least do no harm and curtail environmental impact. “Profit” is the economic value created by the organization after deducting the cost of all inputs, including the cost of the capital tied up. In the original concept, within a sustainability framework, the “profit” aspects needs to be seen as the real economic benefit enjoyed by the host society. People, Planet and Profit
  • 14. • Long Answer Questions : Business is related to making profit, whereas Ethics deal with right or wrong. Therefore business and ethics is not related to each other. Discuss (Oct.10) What do we mean by Business Ethics and what are the roles and responsibilities of various stake holder in it? (Oct.10) • Short Note : What is Triple Bottom Line – Explain the term. (March 11) Questions