Profit: The Purpose of Any Capital Investment

Abstract:

It is well known that any capital producer is interested in capitalizing the capital in a most convenient way. Such a capitalization takes place when the investor makes the decision of investing a certain volume of capital in productive corporative assets, which, practically, means profit-bringer capacities of production.The preliminary calculations made before making the investment decision must substantiate fully the investment decision and must show if this is efficient or not; or, in this context, profit is a basic indicator in the respective choice. The problem appears when and how the profit must be taken into account – we speak about yearly profit, total profit, final profit, the profit remaining after the recovery of the investment. On the other side, another question arises: how must profit be seen as economic effect of the investment or production activity? On the way in which this problem is solved depends decisively the calculations of economic efficiency, the investment decision and, certainly, the later degree of capitalization. These are, briefly, a few aspects that this paper is trying to debate.