The main objective of a business is to maximize profits through regular processes. A business involves goods and services that satisfy the needs of buyers and sellers. This activity is also characterized by risk and capital requirement. A business’s profit potential depends on the capital available for its operations and the types of goods and services it offers. Businesses also face social obligations.
Profit earning is the principal aim of any business, whether it is a small business or a large corporation. Profits allow businesses to continue operations and attract additional capital. They are also essential for business growth, which in turn supports the economy at large. Many small business owners also pursue profit-seeking goals to provide for their family and themselves.
Profit is the difference between the cost of producing goods and services, and the sales and costs of operating a business. Profit is an important part of any business, as it gives the owner a reward for taking risks. Without profit, the business will cease to exist. To achieve a higher level of profitability, businessmen must provide their customers with high-quality goods or services and charge fair prices.
Business objectives must also consider the interests of society. Profit is the primary objective of a business, but the enterprise should also have social and economic objectives. These goals should be interrelated and measurable. The objectives of a business can be divided into general and specific objectives, long-term goals, and short-term goals. Profit and growth are directly related to the objectives of the business.
Characteristics of a business entity
Understanding the characteristics of a business entity is an essential part of business practice and economic productivity. It is vital to know the differences between the major types and how they affect the nature of your business relationships. You must weigh the benefits and drawbacks of each before you make a conscious decision about the type of business entity to create.
One of the most important characteristics of a business entity is taxation. Unless you’re self-employed, you’ll be taxed on your income. The corporate tax rate for businesses is 25 percent. However, some tax advantages can be obtained by forming a limited liability limited partnership or a professional corporation.
Another important characteristic is how the business entity is created. While you can start a business as a sole proprietor, most business owners choose to incorporate. This allows for greater liability protection for them and more flexibility for investors. A corporation has a long-term lifespan and usually employs professional management.
Functions of a business
Business functions are the different activities a business performs and enables it to run efficiently. They help identify the different areas of responsibility and enable it to adapt to changing demands. Different types of businesses need different functions. Some of these functions are not mutually exclusive. For instance, marketing functions may be distinct from production functions.
The core business functions are activities that generate income and provide final goods and services to customers or third parties. However, the firm may have other activities besides these core functions that are more specialized. Some examples of these activities are legal services, bookkeeping and payroll management, health and medical services, procurement, and more.
The production function involves heavy investments in both working capital and fixed assets. The finance manager must control these investments and make sure they are well allocated. Marketing also helps the production manager gain insight into the needs of the customers. Ultimately, these functions result in healthy businesses.