Final answer:
Profit is the difference between total revenue and total cost, and it serves as a reward for risk-taking in business. It can be reinvested for growth or used to raise financial capital in various ways. Profits are essential for a business's continuity, and their absence often leads to the exit of a business from the market.
Step-by-step explanation:
Profit is indeed the reward for risk-taking and is crucial for any business. Profit is defined as Total Revenue minus Total Cost. Businesses can use profits in several ways to ensure their sustained growth and survival in the marketplace. For instance, profits can be reinvested back into the business to fund expansion, research and development, or to improve infrastructure and operations. Additionally, profits can be used to raise financial capital through various means such as attracting early-stage investors, taking loans from banks or issuing bonds, and selling stock in the company.
Moreover, in a competitive market, profits serve as a signal that encourages businesses to expand and new firms to enter the market, a process known as entry. However, lacking profits is a primary reason businesses may cease to exist as they become unable to sustain operations, leading to what's called an exit from the industry.