Final answer:
The operating cycle of a company involves activities that generate revenue, which can be reinvested to grow the business. Profit is the difference between total revenue and total cost, and maximizing revenue is essential for a company's profitability.
Step-by-step explanation:
The operating cycle is a series of activities that a company undertakes to generate revenue and, ultimately, cash. When businesses are profitable, meaning their revenue exceeds their costs, they may choose to reinvest some of those profits. Reinvestment can involve purchasing new equipment, hiring additional staff, or investing in research and development to enhance the company's capacity to produce goods or services. This process can lead to increased sales and larger cash flow in future sales periods, facilitating growth as long as the reinvested cash flow exceeds the depreciation of assets. Profit is essentially calculated as Total Revenue - Total Cost, where every business aims to maximize revenue to ensure profitability.