Final answer:
Companies exist primarily because they create value for customers by offering goods or services that consumers cannot easily replicate, thereby generating profits. While they also serve as investment vehicles and contribute to the tax base, these aspects are secondary to their main function of value creation.
Step-by-step explanation:
When performing internal analysis of firms, the question of "why do companies exist?" can be addressed from various perspectives. However, one fundamental reason that companies exist is because they create value for customers in ways that customers are unable to replicate on their own. Firms are established with the goal of making profits by investing resources such as money, time, and effort to produce and sell goods or services. The company's ability to offer something that is valuable to consumers, and in return, earn profits, is at the core of its existence. While companies also provide means for investment income and contribute to the tax base, these are secondary to the primary purpose of value creation.
Not all businesses succeed, and various factors such as insufficient profits can cause a company to cease operations or exit an industry. Therefore, the creation and continuation of a firm heavily depend on its success in generating sufficient profits by fulfilling a demand in the market.