Much has been said about profit and its implications in the society. Some people have supported the existence of profit. Others have argued against it. This essay intends to establish the need for existence of profit.
Those who have supported the existence of profit have their own reasons that also support the morality of it. Those who have argued against profit have their own reasons that see the immorality in it. For profit to be seen as good it ought to be carried out within certain levels of morality – In this case it will be accepted. For profit to be seen as bad it will exhibit certain levels of immorality thence rejected.
When profit is obtained within acceptable levels, it may not be condoned, agriculture research papers but when obtained at excessive levels without proper justifications, it may carry with it immorality (in which case it is abnormal). That is why we refer to profit as either being normal or abnormal profit.
Justification of Existence of Profit
(a) What is profit?
When goods and services are produced and provided, there is need to understand the costs involved so that a price that includes some return can be established. This selling price includes a mark-up on the cost that eventually gives the profit.
Selling price – costs = profit
Therefore, profit is the money that is obtained above the production costs when goods and services are sold.
For example, when a person sells goods or services to customers, s/he needs to understand what it costs to provide or produce such goods or services and deliver them to customers so that a price can be fixed that brings a profit. For instance,
1. Mr. Kamau sells goods in his shop or kiosk that costs him sh.5, 000. The revenue obtained totals sh.6, 000. Therefore Kamau gets a profit of sh.1, 000.
6,000 – 5,000 = 1,000
S.P – C.P = PROFIT
2. A small scale farmer (Simiyu) uses inputs that go into cultivation of crops on his farm totaling sh.28, 000. After selling what is produced on the farm, he realizes revenue of sh.33, 000. Therefore his profit is sh.5, 000. See Table below
Revenue – cost price = PROFIT
33,000 – 28,000 = 5,000
FARMING COSTS SH.
Clearing of land -500
First ploughing -2,000
2nd ploughing -2,000
Seed (50 kg) -2,500
Weeding (labor) -4,000
Preparation and storage (before sale) -5,000
N.B: considering all living factors, this farmer never has any money in his pocket since the sh.5,000 has to be applied on purchased items e.g. salt, tea leaves, sugar, cooking oil, soap, lotion, basins, cups and kettles, plates, spoons, water jars, clothes-ware and bed-ware, paraffin, matches, leave alone educating children. The farmer relies on his farm for food stuffs.
3. A lady who sells ripen bananas at a local market experiences the following costs and revenues:
Cost of banana bunch 150
Cost of municipal ticket 20
Revenue from sales 220
(S.P) – C.P. = PROFIT
Sh.220 – Sh.170 = Sh.50
N.B: The examples above reflect the general business activities. The corporate business organizations however would call for extensive elaborations that would still arrive at profit that justify their organizations.
(b) How is profit arrived at and the view of it
The above examples give a picture of how profit is arrived at and depending on its level; it therefore can be seen as bad or good
Understanding man’s needs
This essay is talking about profit. The question is HOW and WHY does profit exist? Profit comes about because people have needs that need to be satisfied. Some other people sell to these people (customers) the goods and services that satisfy these needs at a price. But we have seen that price includes the costs of production and a mark-up.
Therefore the satisfaction of man’s needs that leads to trading or commercial activities eventually give rise to profit that’s being talked about here. The inner question of WHY profit exists is discussed elsewhere in this paper.
Identification of resources to effect production
In order to satisfy man’s needs, production has to be effected. The resources that are needed needs to be identified. They will include: Raw materials, equipment machinery, and labor. Therefore production is the transformation of raw materials using equipment, machinery, and human labor to produce goods and services that will satisfy man’s needs.
N.B: We are touching on needs and resources because there will be costs involved in trading transactions that involve sellers and buyers – that will lead to profit for the sellers. The process to produce will call for some organization to effect production. This organization can either be a single person or a business entity that is selling goods and services to customers.
Need for production organization and provision of service