Profit acts as a vital role in the functioning of the economic system. In any industry profit acts as a signal that buyers want more output from that industry. Profits provide incentive for firms to increase production and encourage new firms to enter into that industry. The profit cannot be seen as a selfish motive of any business but induces entrepreneurs to take long business risk. Unless there are no prospects of generating profit entrepreneurs will not devote time and invest resources in any business activity. It encourages firms to develop new products to lower production cost and to provide better services to the consumers. Profit is also expands business activity of the organization. Profit generated from the business reinvests again to expand production or invest into new business. So it allows the firm to continue to business operation. Entrepreneurs can only be motivated to expand its business when it can successfully generate profits from its business operations.

The objectives of business objectives besides profit are facilitative objectives and are meant to be subservient to the profit motive. It can be pointed out that private enterprises are operated on behalf of and for the benefit of the owners. It can be advocated that the owners who have assumed the business risk of investing their funds should get suitable return in terms of profit. It is a reward for the entrepreneurs to share the owning and operating business and also serves as a stimulant for business effort. In any business organization profit is treated as a financial yardstick for measuring business efficiency and for evaluating managerial competency. It evaluates how well the decisions and actions of managements turn out to be effective and how well unwise resources to maximize value for the organization. Profit is the main indication how competitive be business organization is. Business efficiency is often expressed as price- Earning, profit to sales volume, earning to capital employed, earning per share and so on. It is directly or indirectly released to profit generated by the business organization. Outside investors also equate profit with the degree of business efficiency and managerial competence and commit their funds in light of such equation and other related assessments.