AskDefine | Define profit

Dictionary Definition

profit

Noun

1 the excess of revenues over outlays in a given period of time (including depreciation and other non-cash expenses) [syn: net income, net, net profit, lucre, profits, earnings]
2 the advantageous quality of being beneficial [syn: gain]

Verb

1 derive a benefit from; "She profited from his vast experience" [syn: gain, benefit]
2 make a profit; gain money or materially; "The company has not profited from the merger" [syn: turn a profit] [ant: lose, break even]

User Contributed Dictionary

see Profit

English

Pronunciation

  • prŏf'it, /ˈprɒfət/, /"prQf@t/
  • Homophones: prophet
  • Rhymes: -ɒfɪt

Etymology

From prufit (French: profit).

Noun

  1. The money or other benefit an organisation or individual makes. Total income or cash flow minus expenditures and taxes.

Usage notes

When the difference is negative the term loss is correct. Negative profit does appear in microeconomics.

Synonyms

Antonyms

Translations

Verb

  1. To benefit (sb), be of use to (sb).
  2. In the context of "intransitive|construed with from": To benefit, gain.
  3. In the context of "intransitive|construed with from": To take advantage of, exploit, use.

Translations

To benefit, be of use to
To benefit, gain
To take advantage of, exploit, use
Translations to be checked
Translations to be checked

French

Etymology

From profectus.

Pronunciation

Noun

fr-noun m
  1. profit, benefit
    Il a su tirer profit de ses connaissances.
    He managed to take advantage of his knowledge.

Extensive Definition

Profit generally is the making of gain in business activity for the benefit of the owners of the business. The word comes from Latin meaning "to make progress," is defined in two different ways, one for economics and one for accounting.
Pure economic profit is the increase in wealth that an investor has from making an investment, taking into consideration all costs associated with that investment including the opportunity cost of capital. Accounting profit is the difference between price and the costs of bringing to market whatever it is that is accounted as an enterprise (whether by harvest, extraction, manufacture, or purchase) in terms of the component costs of delivered goods and/or services and any operating or other expenses. A key difficulty in measuring either definition of profit is in defining costs. Pure economic monetary profits can be zero or negative even in competitive equilibrium when accounted monetized costs exceed monetized price.

Economic definitions of profit

Note: these definitions are different from those used by accountants
In economics, a firm is said to be making a normal profit when total revenues equal total costs. These normal profits then match the rate of return that is the minimum rate required by equity investors to maintain their present level of investment. Economically, the "normal profit" is thus treated as a cost, and recognized as one of the two components of the cost of capital.
An economic profit arises when its revenue exceeds the total (opportunity) cost of its inputs, noting that these costs include the cost of equity capital that is met by "normal profits." A business is said to be making an accounting profit if its revenues exceed the accounting cost the firm. Economics treats the normal profit as a cost, so when deducted from total accounting profit what is left is economic profit (or economic loss).
All enterprises can be stated in financial capital of the owners of the enterprise. The economic profit may include an element in recognition of the risks that an investor takes. It is often uncertain, because of incomplete information, whether an enterprise will succeed or not. This extra risk is included in the minimum rate of return that providers of financial capital require, and so is treated as still a cost within economics. The size of that return is commensurate with the riskiness associated with each type of investment, as per the risk-return spectrum.
"Normal profits" arise in circumstances of perfect competition when economic equilibrium is reached. At equilibrium, average cost equals marginal cost at the profit-maximizing position. Since normal profit is economically a cost, there is no economic profit at equilibrium. In a single-goods case, a positive economic profit happens when the firm's average cost is less than the price of the product or service at the profit-maximizing output. The economic profit is equal to the quantity of output multiplied by the difference between the average cost and the price.
Economic profit does not occur in perfect competition in long run equilibrium. Once risk is accounted for, long-lasting economic profit is thus viewed as the result of constant cost-cutting and performance improvement ahead of industry competitors, or an inefficiency caused by monopolies or some form of market failure.
Positive economic profit is sometimes referred to as supernormal profit or as economic rent.
The social profit from a firm's activities is the normal profit plus or minus any externalities that occur in its activity. A firm may report relatively large monetary profits, but by creating negative externalities their social profit could be relatively small.
Profitability is a term of economical efficiency. Mathematically it is a relative index – a fraction with profit as numerator and generating profit flows or assets as denominator.

Accounting definitions of profit

Note: these definitions are different from those used by economists
In the accounting sense of the term, net profit (before tax) is the sales of the firm less costs such as wages, rent, fuel, raw materials, interest on loans and depreciation. Costs such as depreciation, amortization, and overhead are ambiguous. Revenue may also be ambiguous when different products are sold as a package, or "bundled." Within US business, the preferred term for profit tends to be the more ambiguous income.
Gross profit is profit before Selling, General and Administrative costs (SG&A), like depreciation and interest; it is the Sales less direct Cost of Goods (or services) Sold (COGS),
Net profit after tax is after the deduction of either corporate tax (for a company) or income tax (for an individual).
Operating profit is a measure of a company's earning power from ongoing operations, equal to earnings before the deduction of interest payments and income taxes.
To accountants, economic profit, or EP, is a single-period metric to determine the value created by a company in one period - usually a year. It is the net profit after tax less the equity charge, a risk-weighted cost of capital. This is almost identical to the economist's definition of economic profit.
There are commentators who see benefit in making adjustments to economic profit such as eliminating the effect of amortized goodwill or capitalizing expenditure on brand advertising to show its value over multiple accounting periods. The underlying concept was first introduced by Schmalenbach, but the commercial application of the concept of adjusted economic profit was by Stern Stewart & Co. which has trade-marked their adjusted economic profit as EVA or Economic Value Added.
Some economists define further types of profit:
Optimum Profit - This is the "right amount" of profit a business can achieve. In business, this figure takes account of marketing strategy, market position, and other methods of increasing returns above the competitive rate.
Accounting profits should include economic profits, which are also called economic rents. For instance, a monopoly can have very high economic profits, and those profits might include a rent on some natural resource that firm owns, where that resource cannot be easily duplicated by other firms.

References

  • Albrecht, William P. (1983). Economics. Englewood Cliffs, New Jersey: Prentice-Hall. ISBN 0132243458
  • Pyle, William W., and Kermit D. Larson (1981). Fundamental Accounting Principles. Homewood, Illinois: Richard D. Irwin. ISBN 0256023867

Notes

profit in Arabic: الربح
profit in Bosnian: Profit
profit in Czech: Zisk
profit in Welsh: Elw
profit in German: Gewinn
profit in Spanish: Beneficio económico
profit in Esperanto: Profito
profit in French: Bénéfice
profit in Korean: 이윤
profit in Croatian: Profit
profit in Indonesian: Laba
profit in Italian: Profitto
profit in Lithuanian: Pelnas
profit in Macedonian: Профит
profit in Dutch: Winst (onderneming)
profit in Japanese: 利益
profit in Norwegian Nynorsk: Profitt
profit in Polish: Zysk (ekonomia)
profit in Portuguese: Superávit
profit in Russian: Прибыль
profit in Simple English: Profit
profit in Slovak: Zisk
profit in Serbian: Профит
profit in Serbo-Croatian: Profit
profit in Finnish: Liikevoitto
profit in Swedish: Vinst
profit in Telugu: లాభం
profit in Turkish: kâr
profit in Vietnamese: Lợi nhuận
profit in Chinese: 利润

Synonyms, Antonyms and Related Words

advance, advantage, advantageousness, advisability, aid, answer, appropriateness, avail, avails, bait, be handy, be of use, be right, befit, befitting, behalf, behoof, beneficialness, benefit, benison, bestead, blessing, boon, box office, break no bones, bribe, capital gains, capitalize on, carrot, cash in on, clean up, cleaning, cleanup, clear, clear profit, coin money, commercialize, commissions, convenience, credit, credits, decency, desirability, disposable income, dividend, dividends, do, do good, do no harm, do the trick, earn, earned income, earnings, encouragement, excess, expedience, expediency, exploit, favor, feasibility, fill the bill, fillip, filthy lucre, fit, fitness, fittingness, forward, fruitfulness, further, gain, gain by, gains, gate, gate receipts, get, gettings, give good returns, gleanings, good, gravy, gross, gross income, gross profit, gross receipts, help, hoard, improve, incentive, incitement, income, inducement, intake, interest, invitation, killing, lucre, lure, make, make a killing, make money, make money by, makings, maximize, neat profit, net, net income, net profit, net receipts, not come amiss, opportuneness, output, paper profits, pay, pay off, payment, pelf, percentage, perk, perks, perquisite, persuasive, pickings, point, politicness, proceeds, produce, product, production, profitability, profits, promote, propriety, provocation, prudence, rake-off, realize, realize on, receipt, receipts, receivables, return, returns, revenue, reward, rightness, royalties, seasonableness, seemliness, serve, serve the purpose, service, stimulation, stimulative, stimulus, store, suffice, suit the occasion, suitability, surplus, sweetener, sweetening, take, take advantage of, take-in, takings, timeliness, turn a penny, turn to account, turn to profit, turnout, unearned income, use, usefulness, utilize, value, wealth, welfare, well-being, whet, winnings, wisdom, work, work for, world of good, worth, worthwhileness, yield, yield a profit
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