DEFINITION of 'Lucrative'

Lucrative means to produce wealth. To be lucrative, means that an item or idea can create a large volume of income. The term lucrative is generally use to describe something with the potential to make money. This can include anything from collecting coins, creating a new invention or idea, or a person. Lucrative can be used in both past and present tenses. If used in present terms there is no guarantee that a particular idea with be a profitable venture, but if used in the past tense it signifies that the idea has been proven to produce wealth.

BREAKING DOWN 'Lucrative'

For example, an analyst may suggest that a stock is highly lucrative. What the analyst is suggesting is that this stock has the potential to be profitable. People can suggest that the stock market is a lucrative place to make money, but it is also a place where large amounts of money can be lost. People will always have their own interpretation of whether an idea or item is lucrative.

Ways of Becoming Lucrative

Lucrative can be used to describe individual or organizational efforts to produce profit on a short or long-term basis. Lucrativeness is more associated with the net earnings rather than gross revenue. If an individual may seek a lucrative career or want to launch a business, for instance, that provides a positive return on investment. Their occupation or venture might have the potential for high revenue generation however there may be additional costs, risks, and other forms of exposure that reduce the lucrativeness of that position. For example, a business owner may need to procure a variety of insurance coverage for themselves and the company in case of workplace accidents, product liability, or employee-related matters. Compliance with regulatory requirements, such as disclosing material information on a consistent basis or adhering to operational guidelines, can incur additional costs that further reduce the lucrativeness of a business. Heavy industry may have to clean up waste material produced by their operations.

The path to achieving lucrativeness can be complex. For instance, if 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 not only the operating revenue and earnings, but 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 that was made into the company, plus its debts, the deal would not be considered lucrative.

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