Profit Definition
Profit is the total revenue from sales of a product or service minus the total costs of producing and selling that product or service. In other words, profit equals revenue minus expenses. For a company to be profitable, its total revenues must exceed its total expenses.
Revenue is the total amount of money that a company brings in from sales of its products or services. Expenses are the costs incurred in making and selling those products or services. Examples of expenses include raw materials, labor, shipping, and marketing.
To calculate profit, you simply subtract expenses from revenue. For example, if a company has total revenues of $100,000 and total expenses of $80,000, its profit would be $20,000.
It’s important to note thatprofit is not the same thing as cash flow. Cash flow is the net amount of cash that a company generates (or loses) over a period of time. It’s possible for a company to be profitable but have negative cash flow if it’s paying out more money than it’s taking in.
