What is profit

Profit is the financial gain realised by a business when its income exceeds the total costs and expenses incurred in operating the business. This includes operational expenses, taxes, interest on debts, and any other costs related to maintaining the business.

It’s also commonly referred to as net profit, net income, or simply surplus.

What do you use profit for?

Profit can be assessed on an overall scale for the entire business or analysed for specific products or services. This financial metric serves as an indicator to determine which aspects of a business are most lucrative and can inform strategic decision-making. For instance, a company may decide to discontinue products with low profitability and concentrate efforts on those that yield higher profits.

The choice to focus on the most profitable areas is common; however, other considerations may impact such decisions, including long-term business goals, market positioning, and customer satisfaction. Profit is not solely a figure on a balance sheet, but a critical component used to drive growth, investment, and stability within a business.