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To what extent is profit a good indicator of the success of an organisation

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Introduction

ESSAY SUBJECT: BUSINESS STUDIES TITLE: TO WHAT EXTENT IS PROFIT A GOOD INDICATOR OF THE SUCCESS OF AN ORGANISATION NAME: QIMIN LIU GROUP: D DATA: 01-12-2001 In most of people's opinion, the aim of operating a business enterprise is attempt to achieve as much return as possible. However this is perhaps too general an assumption to make. Thus this essay is going to discuss what extent is profit a good indicator of the success of an organisation. At the beginning, it explains the deep-seated signification of profit. Following this, not-for-profit organisation and profit organisation are analysed with their objectives. Also in this essay, some important factors that affect the measurement of success of organizations are discussed as well. Some examples are quoted and a few graphs are showed in this essay in order to give further dissertation of indicator for business. The definition of profit in dictionary is advantage, benefit, return, etc. But these are not appropriate to indicate whether an organisation is successful or not. The success of an organisation not just depend on how much it earn but others "profits" such as the reputation in society, the strength of further development and so on. ...read more.

Middle

But in 2000, the figure of Profit after taxation is greater than the figure in 2001. That mean although the Profit before amortisation of goodwill, exceptional items and taxation in 2001 exceeded that in 2000, The Great Universal Store P.L.C. still earned less profit. This example proves that enterprises can not be considered successful by profit return; extraordinary items which is the most typical extra factor could affect the profit return. For example, a firm could sell their fix assets such as building and machinery to get more money in order to make the profit return high. However, this firm could not be considered successful in long-term and shareholders will not affirm its future. In the account of an enterprise, different types of profit have their own function to indicate how is a firm works in short-term or long-term. Another example can be used for arguing last sentence is the relationship between gross profit and operating profit. If an enterprise spends lots of operating expenses, the operating profit will be showed poor in this case. May be people will think this firm has not got enough potential for the competition in market. ...read more.

Conclusion

What people outside the organisation think about the success indicator should be? There are some views were collected as follows. ? exhaustive, covering the full complement of stakeholder requirements, ? quantifiable ? collected from stakeholders themselves ? reliable, that is the measurement, must accurately reflect the quantity it is designed to measure, ? repeatable, so that if the quantity being measured remains unchanged over time data collected over time will reflect this, ? revised as stakeholder needs evolve Besides, the evolution of market, new competitors, the quality of profit, etc is the factors influence the indicator of success of an organisation. But in here, we are not going to detail these factors. In conclusion, defining appropriate success measurements of an organization is not a simple affair. It involves a focus on what stakeholders want rather than what the organisation is achieving. Often determining success measurements requires a long-term view. Though profit is a good indicator, it can not reveal how an organisation runs. In some cases, like in the not-for-profit organisation, profit is not an indicator of success of an organisation at all. So there is no exact answer to respond what extent is profit a good indicator of success of an organisation. But reader should recognize that we can solve this problem by analysing profit that organisation achieve with a lot of other external complications. ...read more.

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