Profit

What is Profit?

Profit is the amount of earnings that exceed expenses for the period. Profit is one of the most important terms in business and finance. Profit is also called net income. It’s the remaining amount that is left over after all the necessary and matched expenses are subtracted for the tenure.

Most essentially, it's the factor or the financial reward that business people strive to receive. Net profits are what is left after we add up all the costs and subtract the total from its sales revenue. In most cases, profits are calculated after the company pays its taxes.

Profit Formula

The Profit Formula is given as,

Calculation of Profit Formula

For illustration purpose, let's understand the profit formula by taking up a calculation-

Suppose, a retailer buys a watch in bulk for INR 200 each. He sells them for INR 300 each. What is the profit in percentage?

• Selling price of the watch= INR 300
• Cost price of the watch= INR 200

Profit of the watch

= Selling Price−Cost Price/Cost Price × 100

= 300-200/200 x 100

= 50%

Profit Measures

There are several different ways a firm can make a ‘profit.’ Some examples of different profit measures are:

• Gross profit

• Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA)

• EBIT (Earnings Before Interest and Taxes)

• EBT (Earnings Before Taxes) or Net Profit Before Tax

• Earnings after Tax