why businesses exist

• businesses exist in order to achieve business objectives. these include:

  • profit
  • growth
  • survival
  • cash flow
  • social
  • ethical
• profit:

  • to achieve sales revenue that is higher than total costs.
  • profit = sales revenue - total costs
• growth:

  • to increase in size either by value of sales or volume of sales.
  • this may be organically i.e. opening new stores, launching new products or externally i.e. by joining with other businesses or taking them over.
• survival:

  • to continue to exist as a business.
  • this may be the primary objective of a start-up business or one experiencing difficult trading conditions.
• cash flow:

  • to ensure sufficient cash is available to meet day-to-day expenses.
  • cash flow is the flow of cash into and out of a business over a period of time.
• social:

  • to behave in a way which benefits society.
  • this could include creating employment, supporting the local community or improving educational standards.
• ethical:

  • to behave in a way which is considered to be morally correct.
  • this could include treating key stakeholders including suppliers and employees in a fairly or reducing negative impacts on the environment.