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Accounting for Non-Accountants, 10th Edition by David Horner

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02

Income statements

Introduction

Generating as much profit as possible (known as profit maximization) is often seen as the main objective for many businesses. It is possible that a business has other objectives, such as growth or survival, but it is likely that profit will feature in the minds of the managers of a business when asked what they would like to achieve. Calculation of this profit will be important for the following reasons:

  • A business may need to raise external finance (eg in the form of a bank loan) and the lender will want some reassurance that any debt will be repaid and may want to see if the business is currently profitable or is likely to be profitable in the near future.
  • Profit allows a business to grow. Profits mean more ...

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