Profit

Definition

Profit is the excess of returns over expenditures in transactions or series of transactions.

Purpose

The purpose of profit is to provide a measure of the financial gain achieved by a business, indicating its success and sustainability. Profit is essential for growth, reinvestment, and rewarding stakeholders.

Examples of Use

• Businesses calculate profit to determine the effectiveness of their strategies.
• Investors look at profit figures to make informed decisions about buying or selling stocks.
• Profit is used to fund expansion, research and development, and dividends to shareholders.

Related Terms

• Revenue: The total income generated from sales of goods or services.
• Expenses: The costs incurred in the process of earning revenue.
• Net Income: The total profit after all expenses, taxes, and costs have been deducted from revenue.

Notes

Profit is a key indicator of a business’s health and is used to gauge its potential for future growth and investment.