A country’s profit has a lot to do with whether or not the industries based in that country are doing well financially. The higher industrial profit in a country, the higher the profit for the entire country will be. Here are some reasons for why that is the case:
Better profits will equal more jobs.
In most business models, the business starts out small at first, until it grows in profits as well as demand. When the business gets to the point where it is bringing in profits but not able to meet demand, that business may way to invest in another plant to produce the goods it is selling. Along with this new plant will be new workers, and this improves employment in the country. Employment will play a key factor in a couple other points, as well.
Higher employment leads to increased spending.
This is nothing new; when unemployment is down and the economy has a more positive look to it, consumers feel more comfortable spending their money instead of saving it all. Due to sales taxes and business loans, some of the consumers’ money will go toward profit for the country. Consumers spending more money will also contribute to #1 by giving business more reason to expand.
Higher employment could also lead to more tax revenue.
This is because of income tax, which is collected from employees’ paychecks. The more paychecks are being produced, the more income tax the government can collect.
- Tax revenue can also be obtained from goods. If a good is taxed and there is an industry boom for that good, that will also create more profit for the country, as the taxes from those sales are going toward the government’s money.
A big enough business may create franchises in other countries.
This is important, because although the franchise is in a different country, there are franchising fees that must be paid to the corporation. If the franchise is located in another country and paying fees to the corporation’s country, then that is foreign money that is entering the country, which creates profits for that country. The corporation may also export goods to the other country, in order for the franchise in that country to sell the same goods.
Other countries may also want to import goods from the profitable country.
If your country’s industry is producing a popular good that other countries want, your country can export any excess of that good to other countries. This not only helps your country’s profits due to sales revenue, but also could assist a country that is in debt getting out of debt. This is because a country importing more than they are exporting often contributes to debt to other countries. If the country starts exporting more frequently to a country they are indebted to, this may help them get out of debt sooner.
These are some of the key reasons why it is important for an industry to profit, not only for the health of that one business or industry but also for the health of the country.