Profit

From WikiMD's Wellnesspedia

Profit is a financial benefit that is realized when the amount of revenue gained from a business activity exceeds the expenses, costs, and taxes needed to sustain the activity. Any profit that is gained goes to the business's owners, who may or may not decide to spend it on the business. Profit is often seen as a key indicator of a company's success and growth potential.

Definition[edit | edit source]

Profit is the surplus remaining after total costs are deducted from total revenue, and the basis on which tax is computed and dividend is paid. It is the best known measure of success in an enterprise.

Profit is reflected in reduction in liabilities, increase in assets, and/or increase in owners' equity. It furnishes resources for investing in future operations, and its absence may result in the extinction of a company. As an objective of business, profit is achieved through efficient and effective management of operations and resources.

Types of Profit[edit | edit source]

There are several types of profit, including:

  • Gross Profit: This is the profit a company makes after deducting the costs associated with making and selling its products, or the costs associated with providing its services.
  • Net Profit: Also known as net income or net earnings, this is a measure of the profitability of a venture after accounting for all costs. In a financial context, it is periodically measured via the income statement as Revenue minus Cost of Goods Sold and Operating Expenses (the latter inclusive of taxes and interest).
  • Operating Profit: This is the profit from a firm's core business operations, excluding deductions of interest and tax.

Profit in Economics[edit | edit source]

In economics, profit in the theoretical sense has a number of possible meanings:

  • Normal Profit: This is a component of (implicit) costs and not a component of business profit at all. It represents the opportunity cost, as the time that the owner spends running the firm could be spent on running a different firm. The normal profit is a part of the cost of production.
  • Economic Profit: This is, at least in theory, normal profit plus economic rent. It is also known as excess profit.

Profit in Accounting[edit | edit source]

In accounting, the profit can be distributed among several sections of the company, including:

  • Retained Earnings: Profit remaining after all costs, tax and dividends have been paid. Profit retained in the business has a direct impact on the amount of dividends.
  • Dividends: Any distribution of a company's earnings to its shareholders, usually in the form of cash or additional shares.

See Also[edit | edit source]

Wiki.png

Navigation: Wellness - Encyclopedia - Health topics - Disease Index‏‎ - Drugs - World Directory - Gray's Anatomy - Keto diet - Recipes

Search WikiMD


Ad.Tired of being Overweight? Try W8MD's physician weight loss program.
Semaglutide (Ozempic / Wegovy and Tirzepatide (Mounjaro) available.
Advertise on WikiMD

WikiMD is not a substitute for professional medical advice. See full disclaimer.

Credits:Most images are courtesy of Wikimedia commons, and templates Wikipedia, licensed under CC BY SA or similar.


Contributors: Admin, Prab R. Tumpati, MD