3.6: Profits Flashcards
What are profits in the context of a business?
Profits are the excess of revenues over expenses, closely associated with competition. T
hey drive businesses to innovate, expand, and produce goods and services.
Profits also serve as a regulator of efficiency and a measure of effectiveness.
How are profits used within a business?
Profits can be retained in the business to fund new products and technologies or to reward risk-taking.
However, excessive profits may stem from undervaluing resources, including labor and environmental inputs, leading to negative externalities.
What are the ethical concerns related to profits and their generation?
Profits may arise from undervaluing the natural environment, technology, and labor.
There is an ethical question of whether this undervaluation is an efficient business practice or a way to disguise the true cost and impact on nature and humans.
How do many in society view profits?
While some view profits as appropriate, others consider maximizing profits through reducing competition to be immoral.
The role of profits has evolved, especially as corporations grow larger and prices are more influenced by government regulation.
What are some factors that affect profits besides competition?
Factors include taxation, inflation, barriers to market entry, advertising, brand loyalty, and reputation.
These factors can sometimes lead to higher profits than would be realized under conditions of perfect competition.
What were the profit levels of major Canadian banks in 2022?
By mid-2022, the major Canadian banks had recorded a 23.8% increase in profits over the previous year.
For example, Toronto-Dominion Bank reported earnings of $6.67 billion in Q4 2022, while Bank of Montreal reported $4.48 billion in profits.
Why are banking industry profits considered controversial?
Critics argue that excessive profits are made while consumers face rising service fees, inflation, and interest rates.
There is debate over whether these profits are justified and whether they should be taxed or regulated by the government.
What ethical concerns does the Bank Accountability Campaign raise?
The Bank Accountability Campaign argues that major Canadian banks are generating profits by firing workers, reducing services, and raising fees and interest rates, which increases consumer debt and economic inequality.
