What Is Lucrative?

An investment or any commercial venture is considered to be lucrative if it produces substantial wealth.

The term lucrative can be used to describe any venture or activity that has the potential to make money. A lucrative activity could be anything from collecting art, designing an invention, or following through on an idea for an innovative product or service.

Lucrative can be used in both past and present tenses. In the present tense, it describes potential. In the past tense, it indicates that the venture has produced wealth.

Understanding Lucrative

An analyst may conclude that a particular stock is highly lucrative. What the analyst is suggesting is that this stock has the potential to be profitable.

It's tempting to suggest that the stock market is a lucrative place to make money, but it is also an easy place to lose a large amount of money. People will always have their own interpretation of whether an idea or a course of action is lucrative, at least when it is used to describe potential rather than reality.

Key Takeaways

  • An idea, a venture, or a product that creates substantial returns is lucrative.
  • In business, a product can be deemed lucrative only if it produces substantial money in net returns, not gross receipts.
  • A product can be termed lucrative only in the past tense. In the present tense, it indicates potential, not reality.

When It's Not Lucrative Enough

Lucrative can be used to describe an effort by an individual or an organization to produce profit on a short or long-term basis. But in business, lucrativeness is associated with net earnings rather than gross revenue.

By that measure, in 2019 the most lucrative companies in America were Apple Inc., Microsoft Corp., Alphabet Inc., JPMorgan Chase & Co., and Intel Corp. All of them, in fact, appear on the 2019 list of the 10 most profitable companies in the world. The other five companies on the list, by the way, are all based in China.

An individual may want to pursue a career or launch a business that provides a positive return on investment. The occupation or venture might have the potential for high revenue generation. But the direct costs and risks may reduce or eliminate its lucrativeness.

That is a very real hazard of doing business. A business owner may need to procure insurance against workplace accidents and product liability. Compliance with regulatory requirements can incur additional costs that further reduce the lucrativeness of a business.

Lucrative comes from the Latin word lucrativus, which translates to 'has gained’.

The path to achieving lucrativeness can be complex. A startup company might raise capital through numerous funding rounds. The investors and the founders alike will need the company to pursue strategies that maximize the operating revenue and earnings and create the potential for profitable returns for the investors. If the company were to sell to a buyer who offered less than the overall investment, no matter how big that number was, the deal would not be considered lucrative.