September 29, 2021

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Revenue: A Crucial Evil


A lot has been stated about revenue and its implications within the society. Some folks have supported the existence of revenue. Others have argued towards it. This essay intends to determine the necessity for existence of revenue.

Those that have supported the existence of revenue have their very own causes that additionally help the morality of it. Those that have argued towards revenue have their very own causes that see the immorality in it. For revenue to be seen pretty much as good it should be carried out inside sure ranges of morality – On this case it is going to be accepted. For revenue to be seen as unhealthy it’ll exhibit sure ranges of immorality thence rejected.

When revenue is obtained inside acceptable ranges, it will not be condoned, however when obtained at extreme ranges with out correct justifications, it might carry with it immorality (wherein case it’s irregular). That’s the reason we discuss with revenue as both being regular or irregular revenue.

Justification of Existence of Revenue

(a) What’s revenue?

When items and companies are produced and supplied, there may be want to grasp the prices concerned so {that a} value that features some return may be established. This promoting value features a mark-up on the fee that finally provides the revenue.

Promoting value – prices = revenue

Due to this fact, revenue is the cash that’s obtained above the manufacturing prices when items and companies are offered.

For instance, when an individual sells items or companies to clients, s/he wants to grasp what it prices to offer or produce such items or companies and ship them to clients so {that a} value may be mounted that brings a revenue. For example,

1. Mr. Kamau sells items in his store or kiosk that prices him sh.5, 000. The income obtained totals sh.6, 000. Due to this fact Kamau will get a revenue of sh.1, 000.

6,000 – 5,000 = 1,000


2. A small scale farmer (Simiyu) makes use of inputs that go into cultivation of crops on his farm totaling sh.28, 000. After promoting what’s produced on the farm, he realizes income of sh.33, 000. Due to this fact his revenue is sh.5, 000. See Desk beneath

Income – price value = PROFIT

33,000 – 28,000 = 5,000


Clearing of land -500

First ploughing -2,000

2nd ploughing -2,000

Seed (50 kg) -2,500

Fertilizer -6,000

Labor -3,000

Weeding (labor) -4,000

Harvest -3,000

Preparation and storage (earlier than sale) -5,000

TOTAL -28,000

N.B: contemplating all residing elements, this farmer by no means has any cash in his pocket because the sh.5,000 must be utilized on bought objects e.g. salt, tea leaves, sugar, cooking oil, cleaning soap, lotion, basins, cups and kettles, plates, spoons, water jars, clothes-ware and bed-ware, paraffin, matches, go away alone educating kids. The farmer depends on his farm for meals stuffs.

3. A woman who sells ripen bananas at an area market experiences the next prices and revenues:


Price of banana bunch 150

Price of municipal ticket 20

Income from gross sales 220

(S.P) – C.P. = PROFIT

Sh.220 – Sh.170 = Sh.50

N.B: The examples above mirror the overall enterprise actions. The company enterprise organizations nonetheless would name for in depth embellishments that may nonetheless arrive at revenue that justify their organizations.

(b) How is revenue arrived at and the view of it

The above examples give an image of how revenue is arrived at and relying on its stage; it due to this fact may be seen as unhealthy or good

Understanding man’s wants

This essay is speaking about revenue. The query is HOW and WHY does revenue exist? Revenue comes about as a result of folks have wants that should be glad. Another folks promote to those folks (clients) the products and companies that fulfill these wants at a value. However we’ve seen that value contains the prices of manufacturing and a mark-up.

Due to this fact the satisfaction of man’s wants that results in buying and selling or industrial actions finally give rise to revenue that is being talked about right here. The internal query of WHY revenue exists is mentioned elsewhere on this paper.

Identification of assets to impact manufacturing

With a view to fulfill man’s wants, manufacturing must be effected. The assets which are wanted must be recognized. They’ll embrace: Uncooked supplies, gear equipment, and labor. Due to this fact manufacturing is the transformation of uncooked supplies utilizing gear, equipment, and human labor to provide items and companies that may fulfill man’s wants.

N.B: We’re pertaining to wants and assets as a result of there will probably be prices concerned in buying and selling transactions that contain sellers and patrons – that may result in revenue for the sellers. The method to provide will name for some group to impact manufacturing. This group can both be a single particular person or a enterprise entity that’s promoting items and companies to clients.

Want for manufacturing group and provision of companies

What’s a enterprise group?

That is the authorized coming collectively of individuals and different assets to offer items and companies to would-be clients at a revenue. The idea on this definition is that such a company is suitable underneath the legislation for the society, and is registered. The products and companies ought to offer satisfaction to the patrons (clients). The value at which the products and companies are offered is anticipated to incorporate a revenue.

The approaching collectively of such a company is not going to solely determine the assets but additionally the prices or rewards that go to such assets (elements of manufacturing)

Elements of manufacturing Rewards

Labor – Wages and salaries

Land – Lease

Capital -Curiosity

Entrepreneurship -Revenue

N.B: the rewards right here may be interpreted as prices that go to the elements of manufacturing and therefore they should be understood as they relate to the revenue mannequin

Instance of individuals with wants:

An individual who’s thirsty buys a smooth drink

An individual with torn costume takes it to a tailor for restore

An individual with lengthy hair might go to the barber for hair lower

A pupil who desires to write down might purchase a pen

A household might have a home or place to remain in

An individual with uncared-for footwear might have a brush and shoe polish

Wants due to this fact come both within the type of primary or secondary and have totally different precedence for every particular person

Enterprise organizations additionally exist at totally different ranges e.g. proprietary companies -individually owned; partnership companies that will contain two or extra individuals who’ve determined to come back collectively to pool their assets, and firms or firms that contain traders who purchase shares within the group which are registered with the registrar of firms.

Understanding prices and mannequin resulting in revenue

Enterprise because it exists at any stage includes numerous prices. These embrace:

(a) Fastened prices – that are incurred whether or not or not the enterprise is producing items and companies e.g. the price of gear and equipment, buildings, land

(b) Variable prices – these are prices which range in keeping with stage of manufacturing or exercise e.g. uncooked supplies, labor (direct labor)

(c) Overhead prices – these are prices which can’t be instantly attributed to particular models. The best way they’re handled is that they’re normally lumped collectively and utilized to the products offered e.g. water, electrical energy, administrative prices.

(d) Marginal prices – this can be a price that’s utilized to each further unit produced. It’s arrived at by dividing change in amount produced (at any explicit stage) by change in complete prices (at that specific stage). N.B:

(e) Complete prices = mounted prices + variable price + overhead

In our revenue mannequin, it could due to this fact be established that:

Income – [fixed costs + variable costs + overhead] = revenue

It’s also very vital to grasp the idea of common prices. These are merely the varied kinds of prices relevant to particular person models produced and offered, taking into consideration that we’ve companies which are concerned in manufacturing and others are concerned in shopping for already manufactured items which they in flip promote to clients or customers.

Examples of common prices: common mounted prices, common variable prices, common complete prices

Why ought to a enterprise or enterprise particular person perceive prices?

That is required as a result of the appropriate value that may result in acceptable revenue can solely be arrived at after contemplating these points. And in addition it have to be understood that companies contribute to the event of economies. A superb instance here’s a take a look at the notorious “Triangle Commerce”. Low-cost or free feedstock corresponding to cotton, cocoa, tea, latex and timber (in addition to human useful resource – slaves), had been exported from Africa – on the west coast of the continent, and from Latin America to Europe through London. In alternate, completed merchandise had been offered at exorbitant costs to the identical supply nations. This heralded the eventual mismatch of economies throughout the Atlantic therefore terminologies such because the “first world” and “third world” international locations. The style wherein companies conduct themselves can contribute to the discount of poverty within the society. They will additionally promote entrepreneurship within the society, extra so in poor international locations. As a enterprise goes about its actions has an impression on the development or degradation of the surroundings.

Why ought to enterprise pursue the revenue motive?

As companies go about pursuing a revenue, how ought to they conduct themselves in relation to the surroundings and utilization of assets, how they make the most of the revenue earned contemplating the truth that the world on which we stay on has turn out to be a village? That is to say that points and issues have turn out to be globalized.

Though it’s identified that companies function in two environments viz. inner and exterior environments, their impression is properly assessed or evaluated towards numerous features that may collectively be described as “the social accountability of enterprise”. The enterprise hereby assumes the place as caretaker of assets i.e. it carries out its actions for the great of the folks.

Enterprise entity as a citizen of the land has numerous obligations to the folks and neighborhood which it serves. These tasks come underneath the next issues which hitherto are the core tasks of enterprise:

(a) creation and provision of secure items and companies to the folks

(b) creation of employment that gives an revenue to the employees

(c) attending to worker welfare, making certain acceptable well timed pay (wages and salaries)

(d) settlement of money owed with suppliers

(e) assembly with traders’ needs

(f) complying with the legislation of the land and authorities e.g. paying taxes

(g) defending the surroundings i.e. finishing up enterprise actions and enterprise corrective measures with out harming the surroundings e.g. within the space of water, air air pollution, noise, strong waste air pollution, chemical residue air pollution as is within the case of agriculture

(h) Philanthropic contributions. That is the place the enterprise contributes to worthy causes within the society.

Due to this fact it may be seen that if enterprise doesn’t behave responsibly there are a number of social issues that may comply with e.g. lack of revenue, break up in marriages, suicides, psychological illness, and many others.

N.B: as enterprise carries out its aims and makes a revenue inside agreed justifiable limits and undertakes to fulfill these obligations socially (the place the deprived individuals within the society entry companies) then it may be considered as having fun with an ethical revenue.

However the place a enterprise carries out its actions and in a technique or one other denies society entry to items and companies, or topics the society to some struggling and but it enjoys good earnings, it’s then having greed revenue i.e. the earnings are loved by only some even with disregard to the surroundings.

How greed earnings and regular earnings come about

(Understanding the market construction wherein the enterprise operates)

Usually, most companies function within the following market constructions:

(a) Pure competitors – that is the place companies enters and exits the trade with ease i.e. at their very own will or energy. Pure competitors operates underneath sure assumptions:

– Straightforward entry and straightforward exit.

– the enterprise takes the worth set by the trade

– it assumes no transportation prices

(b) Monopoly – right here a single enterprise dominates the trade and even varieties the trade e.g. the Kenya energy and lighting firm, KPLC. Right here, the enterprise units the worth. The flexibility to stay monopoly relies on sturdy monetary muscle mass, management over key expertise or useful resource

(c) oligopoly – right here the market consists of some companies that serve the market e.g for the petroleum firms such because the BP,Shell,Complete…

(d) Monopolistic competitors – right here the market construction reveals some pure competitors circumstances and monopoly circumstances.


From the foregoing argument, it’s established that revenue is a vital evil i.e. it’s wanted for the enterprise to function in a wholesome manner wherein case it’s ethical

It is just when companies embrace ultra-vires aims in its actions and makes use of the earnings earned with disregard to the society and the surroundings that it turns into immoral


The best way companies make revenue and the way they conduct themselves dictates how they’re referring to morality of revenue. E.g. within the case of monopoly companies, companies appear to go for greed revenue which is considered as immoral. Regardless of whether or not they’re contributing to social accountability or not the pursuit of revenue shouldn’t be checked out as in itself, however as an avenue of attaining good within the society therefore a vital evil.

It should even be understood that it is very important perceive the existence of the range of the folks of the world and their communities e.g. the folks in South America; Asia; Australia and New Zealand; the folks in Europe; in North America and the folks in Africa cherish their very own respective views. Now we have nonetheless established right here on this paper a consideration of the place of the worldwide village towards the present universally shared pursuits, markets, currencies, training programs and data expertise and many others.

For African societies, it’s higher in the event that they body the event of their economies based mostly on attachment to the soil. This assertion is framed so as a result of trying on the actions that may result in creating extra employment and sustenance have attachment to the soil and the environmental administration e.g. searching; pastoralism; agriculture; tourism; mining; and the at present astronomical era of electrical energy through hydro, or photo voltaic. Enhancement of such actions shall finally metal the present dwindling of crops rising; manufacturing of meals that shall therefore stimulate the event of agriculturally associated industries to fulfill man’s wants. There’s an avenue for folks to make use of their potential by shopping for the wanted merchandise. This shall additionally strengthen the industries that produce them.

Source by Boniface Makalasia