What is Profit?

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Profit is the difference between what it costs to produce something and what you sell it for.

If you’re selling a product for more than it costs, you’re making a profit. It indicates how your business is functioning and performing in the market.

Profit calculation

To calculate your profit, you need to consider a wide range of costs, like material costs, labor costs, overhead expenses, and marketing costs.

• Positive number – you’re turning a profit
• Negative number – your business is losing money
• Zero – you’re breaking even

For example, your business has a revenue of $80,000 per year, and your expenses are $20,000, so your net annual profit is $60,000.

Profit formula

Profit = Revenue – Expenses