Revenue: A Needed Evil


A lot has been mentioned about revenue and its implications within the society. Some folks have supported the existence of revenue. Others have argued in opposition to it. This Essay intends to ascertain 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 in opposition to 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’s going to 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 could carry with it immorality (during which case it’s irregular). That’s the reason we consult with revenue as both being regular or irregular revenue.

Justification of Existence of Revenue

(a) What’s revenue?

When items and providers are produced and offered, there’s want to grasp the prices concerned so {that a} value that features some return will be established. This promoting value features a mark-up on the associated fee that finally offers the revenue.

Promoting value – prices = revenue

Subsequently, revenue is the cash that’s obtained above the manufacturing prices when items and providers are offered.

For instance, when an individual sells items or providers to clients, s/he wants to grasp what it prices to supply or produce such items or providers and ship them to clients so {that a} value will be fastened that brings a revenue. As an illustration,

1. Mr. Kamau sells items in his store or kiosk that prices him sh.5, 000. The income obtained totals sh.6, 000. Subsequently 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. Subsequently his revenue is sh.5, 000. See Desk beneath

Income – value 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 components, 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:


Value of banana bunch 150

Value 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 final enterprise actions. The company enterprise organizations nonetheless would name for in depth gildings that might 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 will 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 happy. Another folks promote to those folks (clients) the products and providers that fulfill these wants at a value. However we’ve seen that value consists of the prices of manufacturing and a mark-up.

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

Identification of assets to impact manufacturing

To be able to fulfill man’s wants, manufacturing must be effected. The assets which might be wanted must be recognized. They are going to embody: Uncooked supplies, gear equipment, and labor. Subsequently manufacturing is the transformation of uncooked supplies utilizing gear, equipment, and human labor to supply items and providers that can fulfill man’s wants.

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

Want for manufacturing group and provision of providers

What’s a enterprise group?

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

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

Components of manufacturing Rewards

Labor – Wages and salaries

Land – Hire

Capital -Curiosity

Entrepreneurship -Revenue

N.B: the rewards right here will be interpreted as prices that go to the components 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 mushy drink

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

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

A scholar who needs to put in writing could purchase a pen

A household may have a home or place to remain in

An individual with uncared-for sneakers may have a brush and shoe polish

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

Enterprise organizations additionally exist at completely 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 companies or corporations that contain traders who purchase shares within the group which might be registered with the registrar of corporations.

Understanding prices and mannequin resulting in revenue

Enterprise because it exists at any stage entails numerous prices. These embody:

(a) Fastened prices – that are incurred whether or not or not the enterprise is producing items and providers 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 items. The way in which they’re handled is that they’re often lumped collectively and utilized to the products offered e.g. water, electrical energy, administrative prices.

(d) Marginal prices – this can be a value 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 individual stage). N.B:

(e) Complete prices = fastened prices + variable value + overhead

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

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

It is usually very obligatory to grasp the idea of common prices. These are merely the varied forms of prices relevant to particular person items produced and offered, taking into consideration that we’ve companies which might be concerned in manufacturing and others are concerned in shopping for already manufactured items which they in flip promote to clients or shoppers.

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

Why ought to a enterprise or enterprise individual perceive prices?

That is required as a result of the suitable value that can result in acceptable revenue can solely be arrived at after contemplating these points. And likewise it should 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), have been exported from Africa – on the west coast of the continent, and from Latin America to Europe by way of London. In alternate, completed merchandise have 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” nations. The style during which 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 nations. As a enterprise goes about its actions has an influence on the development or degradation of the setting.

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 setting 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 grow to be a village? That is to say that points and issues have grow to be globalized.

Though it’s identified that companies function in two environments viz. inside and exterior environments, their influence is effectively assessed or evaluated in opposition to numerous points 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 group which it serves. These duties come below the next issues which hitherto are the core duties of enterprise:

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

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

(c) attending to worker welfare, guaranteeing 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 setting i.e. finishing up enterprise actions and enterprise corrective measures with out harming the setting e.g. within the space of water, air air pollution, noise, stable 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.

Subsequently it may be seen that if enterprise doesn’t behave responsibly there are a number of social issues that may observe e.g. lack of revenue, break up in marriages, suicides, psychological illness, and so on.

N.B: as enterprise carries out its aims and makes a revenue inside agreed justifiable limits and undertakes to satisfy these obligations socially (the place the deprived individuals within the society entry providers) then it may be seen 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 providers, or topics the society to some struggling and but it enjoys good income, it’s then having greed revenue i.e. the income are loved by just a few even with disregard to the setting.

How greed income and regular income come about

(Understanding the market construction during which the enterprise operates)

Usually, most companies function within the following market constructions:

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

– Straightforward entry and straightforward exit.

– the enterprise takes the value set by the business

– it assumes no transportation prices

(b) Monopoly – right here a single enterprise dominates the business and even kinds the business e.g. the Kenya energy and lighting firm, KPLC. Right here, the enterprise units the value. The flexibility to stay monopoly relies on sturdy monetary muscle tissue, 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 corporations 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 obligatory evil i.e. it’s wanted for the enterprise to function in a wholesome approach during which case it’s ethical

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


The way in which 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 seen as immoral. No matter whether or not they’re contributing to social accountability or not the pursuit of revenue shouldn’t be checked out as a superb in itself, however as an avenue of reaching good within the society therefore a obligatory evil.

It should even be understood that you will need to perceive the existence of the variety 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. We’ve got nonetheless established right here on this paper a consideration of the place of the worldwide village in opposition to the present universally shared pursuits, markets, currencies, schooling techniques and data expertise and so on.

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. looking; pastoralism; agriculture; tourism; mining; and the presently astronomical era of electrical energy by way of 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.

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