Profit as a Criterion of Enterprise Performance

Abstract

The indicators of enterprise performance which were in use before the adoption of profit (Ch. ib, pp. 4–9) were specialized yardsticks, which often produced conflicting effects, contrary to social interest. The most distinguishing feature of the profit criterion is that it is the most comprehensive of all possible criteria or, as it is described in the Socialist countries, a ‘synthetic’ indicator. It takes account of both the input and output sides. It can be quantified and expressed as a common denominator for a variety of economic effects. It can be employed not only in its absolute form (the profit mass) but also as a relative indicator (a rate of return). Its applicability is universal, whether in industry, agriculture, trade or ‘nonproductive’ services (finance, insurance, housing administration, entertainment).