Posted in Finance, Accounting and Economics Terms, Total Reads: 564

Definition: Profit

Profit is the difference between what is earned through selling minus the cost which went into making what was sold. Profit is a desirable outcome from a business hence is positive. The opposite is Loss.


Profit = Revenue – Expenses

or Profit = SP- CP

A company always looks for earning profits to expand their further business. Profit can be increased by decreasing the expenses.

Profit is directly dependent on the total expenses as sometimes selling price is constant, so there is a tendency to lessen the expenses.

It’s completely the business owner’s decision to use the profit in expanding of the business or in something else.

Sometimes profit is also expressed as negative when it is compared on year to year basis. Example, let the profit of X company is Rs 5000 Cr in 2010 and is Rs 4500 Cr in 2011, and so we say there is 10% reduction in profit in terms of year to year basis.


Let Total revenue generated is Rs 10000.

Expenses is Rs 6000, Overhead Expense are Rs 500, Taxes are Rs 600 and other Miscellaneous expenses are Rs 200,

Then, Profit = (10000 – (6000 + 500 + 600 + 200))

= Rs 2700


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