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Originally Posted by pdnewbie  As for making zero profits, I'm not sure I understand what the problem is. I'm talking zero profits after all expenses have been paid. I'm not just talking about factoring in the budgets of each department. I'm also talking about factoring in the company's commitment to shareholders, to community organisations, and to other third parties, and even an 'emergency fund contribution' (call it what you will), into the selling price of the goods/services. |
I think there's a difference of terminology here. Usually "profit" is defined as the money left over after you've paid for the necessary expenses (rent, cost of goods sold, etc.) If you don't have any of that, you're going to be screwed the first time the rent increases.
What (I think) you're talking about is what to do with that profit. And it's definitely true that you have to find
some use for it. You can't just ignore it on the balance sheet, pretending it doesn't exist. You have to put it somewhere.
As Dani says, future growth, rainy-day savings, or shareholders are the most common places to put it.
And that absolutely
must balance. Otherwise your balance sheet is off and the IRS will come after you.
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What I'm saying is changing the definition of what profit means. Consider insurance against insolvency (in the form of a reserve fund) as an asset in the balance sheet (in total) and an expense in the p&l statement (for each year). Consider payment of dividends to shareholders as an expense. This means to me that profit is then spillover, or a deviation to targets, rather than something to maximise.
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And what you're saying is perfectly valid. But several hundred years' of accounting discussion does
not define dividends to shareholders to be an expense, and thus does not define profit as a deviation from target. You'd be better off to define new terms and use those, because otherwise you'll get into this semantics argument every time, and no one will ever actually discuss your theory.
It also seems to me that you have 3 separate things going on here:
1) A question on what to do with profits, which Dani has answered.
2) A statement/theory/argument that businesses should be socially responsible with regards to the products they're selling, the technologies they're using, their effect on the environment, and the wages and working environment of their employees.
3) A statement/theory/argument that part of social responsibility is to not gouge customers for the sole purpose of increasing profits and expanding business. Businesses should have "target" profit level that takes into account the cost of goods sold and other expenses, the desired rainy-day cushion and distribution to shareholders, and not aim for more than that.
Does that bear any relation to what you're trying to say?