Question

Why is it that showing a “profit” doesn’t always indicate that all is well with an enterprise?What other factors are critical for an enterprise’s success over the long term?

Answer 1

Showing a “profit” doesn’t always indicate that all is well with an enterprise because profit is just one of the measures of success of a company. An enterprise earning a profit is an enterprise that is managing its financials well and that is earning more than it is spending. This leads to a profit. However there are several stakeholders involved in an organization like stockholders, employees, vendors, customers etc. Profit, as a metric, is more of a concern mainly for the stockholders.

Other measures of success of a business are its ability to respond to environmental changes, its ability to run its operations in a sustainable manner, its ability to develop its employees, its ability to meet the needs and requirements of consumers in an optimal manner etc. These days’ enterprises mainly focus on triple bottom line for success. The triple bottom line measures success using the 3Ps – profit, people and planet. Thus an enterprise, in order to be successful, will have to not only be profitable but also should be socially responsible as well as environmentally responsible.