What is gross profit. Analysis of enterprise profit What is profit definition

Hello! In this article we will talk about related, but not identical concepts: revenue, income and profit.

Today you will learn:

1. What is included in the company's revenue?
2. What is the company’s income and profit derived from?
3. What are the main differences between these concepts?

What is revenue

Revenue – earnings from the direct activities of the company (from the sale of products or services). The concept of revenue is found exclusively in business and entrepreneurship.

Revenue characterizes the overall efficiency of the enterprise. It is revenue, not income, that is reflected in accounting.

There are several ways to account for revenue in an enterprise.

1. The cash method defines revenue as the actual money received by the seller for providing services or selling goods. That is, when providing an installment plan, the entrepreneur will receive proceeds only after actual payment.
2. Another accounting method is accrual. Revenue is recognized when the contract is signed or the buyer receives the goods, even if actual payment occurs later. However, advance payments do not count towards such revenue.

Types of revenue

Revenue in an organization is:

1. Gross– the total payment received for a job (or product).
2. Clean– used in . Indirect taxes (), duties, and so on are subtracted from gross revenue.

The total revenue of the enterprise consists of:

• Revenue from core activities;
• Investment proceeds (sales valuable papers);
• Financial revenue.

What is income

The definition of the word “income” is not at all identical to the term “revenue,” as some entrepreneurs mistakenly believe.

Income - the sum of all the money earned by the enterprise through its activities. This is an increase in the economic benefit of an enterprise due to an increase in the company's capital by the receipt of assets.

A detailed interpretation of the ways of generating income and their classification are contained in the Regulations on Accounting “Income of Organizations”.

If cash revenue is funds received by the company’s budget in the course of its core activities, then income also includes other sources of funds (sale of shares, receipt of interest on a deposit, and so on).

In practice, enterprises often conduct diverse activities and, accordingly, have different channels for generating income.

Income – the overall benefit of the company, the result of its work. This is an amount that increases the organization's capital.

Sometimes income is equal in value to the organization’s net revenue, but most often companies have several types of income, and there can be only one revenue.

Income is found not only in entrepreneurship, but also in Everyday life a private person not engaged in business. For example: scholarship, pension, salary.

Receiving funds outside the scope of reference entrepreneurial activity will be called income.

The main differences between revenue and income are given in the table:

Revenue	Income
Summary of main activities	The result of both main and auxiliary activities (sale of shares, interest on bank deposits)
Occurs only as a result of management commercial activities	Allowed even for unemployed citizens (benefits, scholarships)
Calculated from funds received as a result of the company’s work	Equal to revenue minus expenses
Cannot be less than zero	Let's say it goes negative

What is profit

Profit is the difference between total income and total expenses(including taxes). That is, this is the same amount that in everyday life could easily be put into a piggy bank.

In an unfavorable situation, and even with a large income, the profit can be zero, or even go negative.

The main profit of the company is formed from the profit and loss received from all areas of work.

The science of economics identifies several main sources of profit:

• The company's innovative work;
• An entrepreneur’s skills to navigate the economic situation;
• Application and capital in production;
• Company monopoly in the market.

Types of profit

Profit is divided into categories:

1. Accounting. Used in accounting. On its basis, accounting reports are generated and taxes are calculated. To determine accounting profit, explicit, justified costs are subtracted from total revenue.
2. Economic (excess profit). A more objective indicator of profit, since its calculation takes into account all economic costs incurred in the work process.
3. Arithmetic. Gross income minus miscellaneous expenses.
4. Normal. Necessary income for the company. Its value depends on lost profits.
5. Economic. Equal to the sum of normal and economic profit. Based on it, decisions are made on the use of the profit received by the enterprise. Similar to accounting, but calculated differently.

Gross and net profit

There is also a division of profit into gross and net. In the first case, only costs associated with the work process are taken into account, in the second - all possible costs.

For example, the formula used to calculate gross profit in trade – the selling price of a product minus its cost.

Gross profit is most often determined separately for each type of activity if the company operates in several directions.

Gross profit is used when analyzing areas of work (the share of profit from which activity is greater), when the bank determines the creditworthiness of the company.

Gross profit, from which all costs (loan interest, etc.) have been subtracted, forms net profit. It is accrued to the shareholders and owners of the enterprise. And it is net profit that is reflected in and is the main indicator of business performance.

EBIT and EBITDA

Sometimes, instead of the understandable word “profit,” entrepreneurs encounter such mysterious abbreviations as EBIT or EBITDA. They are used to evaluate the performance of a business when the compared objects operate in different countries or are subject to different taxes. Otherwise, these indicators are also called cleared profit.

EBIT represents earnings as they were before taxes and various interest. It was decided to separate this indicator into a separate category, since it is located somewhere between gross and net profit.

EBITDA- This is nothing more than profit without taking into account taxes, interest and depreciation. It is used exclusively to evaluate the business and its characteristics. Not used in domestic accounting. for commercial equipment.

Thus, income is funds received by an entrepreneur, which he can subsequently spend at his own discretion. Profit is the balance of funds minus all expenses.

Both income and profit can be predicted by taking into account past earnings, fixed and variable costs.

The differences between profit and revenue are as follows:

The line between the concepts may be unclear for an ordinary worker; it does not matter to him how revenue differs from profit, but for an accountant there is still a difference.

See Consolidated (2 digits). operating profit margin before interest and taxes The same as net income.

A hypothetical value defined as the difference between a firm's revenues and its economic costs, including opportunity costs. 2. Economy Income on capital as a factor of production. 3. what. Addition, increase, increment of something.

Population income for ten years.

The ability to make a profit for yourself from any event. Data from other dictionaries

What is gross profit in simple words

It takes into account income from all activities minus production costs. The amount of such profit must be reflected in the accounting book.

balance. Gross profit differs from net profit in that it includes the costs of paying taxes and other obligatory payments.

The amount of gross profit depends on several factors. They are divided into two groups.

The first group includes factors that depend on the management segment: The second group includes external factors:

1. Company location;
2. Natural and environmental indicators.
3. Legislation within which the company operates;
4. The political and economic state in which the state finds itself;

Gross profit must be calculated before taxes are calculated.

The amount obtained after subtracting costs from revenue is profit. Thus, general formula The calculation of profit will look like this: Profit = Revenue - Costs (in financial terms) The net profit of an enterprise is the funds remaining from the balance sheet profit after deducting taxes, fees, deductions and other established payments to the budget.

It is used for investment in the production process, for organizing reserve funds and for increasing working capital. Its size depends on several factors: tax burden on the organization, additional payments; enterprise revenue; cost of goods, etc.

What is profit in simple words

In the English-speaking tradition, the concept of “profit” can correspond to different terms - profit, gain, return.

The amount of profit characterizes the success of business activities; making a profit is usually the main goal and driving motive of all types of entrepreneurship. Profit: definition from Ozhegov’s dictionary 2.

Summary indicator financial results economic activity enterprises. 3. transfer Benefit, benefit (colloquial). What point do I need in this? 4. what.

Addition, increase, increment of something.

P. population. P. water in rivers.

What are revenue, profit and income: how do they differ and what are they formed from?

Revenue is earnings from the direct activities of the company (from the sale of products or services).

The concept of revenue is found exclusively in business and entrepreneurship. Revenue characterizes the overall efficiency of the enterprise. It is revenue, not income, that is reflected in accounting.

There are several ways to account for revenue in an enterprise.

Types of revenue Revenue in an organization is: Gross - the total payment received for work (or goods).

Net – used in accounting.

The meaning of the word profit

There is a distinction between full, total profit, called gross (balance sheet); net profit remaining after paying taxes and deductions from gross profit; accounting, calculated as the difference between price (sales revenue) and accounting costs, and economic profit, which takes into account opportunity costs.

Typically, economic profit is less than accounting profit by the amount of the entrepreneur’s uncompensated own costs that are not included in the cost price, which sometimes include lost opportunities. In addition, there may be costs that are not reflected in the balance sheet. Dictionary of financial terms Explanatory dictionary of the Russian language.

What is profit is simple and clear

The resulting amount formed after the amount of costs is subtracted from revenue is profit. That is, the formula for calculating profit can be expressed as follows: Profit = Revenue – Costs Net represents material resources, which ultimately remain after deducting deductions, all taxes and other payments from the balance sheet profit. An indicator such as net profit is used to calculate the necessary investments in the production process, to plan and organize the main reserve funds, as well as to increase current assets.

If we speak in general outline, size net profit directly depends on several factors: the tax burden on the enterprise, as well as additional deductions; amount of revenue; calculated cost of production and so on.

Gross profit is the total income a firm earns over a given period of time. It takes into account income from all activities minus production costs. The amount of such profit must be reflected in the accounting book. balance.

Gross profit differs from net profit in that it includes the costs of paying taxes and other obligatory payments.

Factors influencing gross profit

The amount of gross profit depends on several factors. They are divided into two groups.

The first group includes factors depending on the management segment:

• Reducing the cost of goods;
• Product sales performance indicator;
• The rate of growth in production volumes;
• Carrying out activities aimed at improving the quality of goods;
• Maximum use of production capacity.

The second group includes external factors:

• Company location;
• Legislation within which the company operates;
• The political and economic state in which the state finds itself;
• Natural and environmental indicators.

How to Find Gross Profit

Gross profit must be calculated before taxes are calculated. The gross profit of an enterprise is determined as the amount with the amount of additional profit. The calculation must be carried out taking into account the type of company:

1. Trading companies. To calculate gross profit, you first need to calculate your total net profit. To determine net revenue, it is necessary to subtract all product returns and discounts provided from the total amount of offsets. Next, you need to subtract the cost of goods sold from the resulting net profit. The resulting difference will be the gross profit of the company.
2. Firms providing services. The gross profit of such firms is equal to net revenue. To calculate, you need to subtract the amount of discounts and returns from the total gross income.

However, before you start calculating gross profit, you should pay attention to the following points:

• Gross revenue. At the end of each working day it is required to verify that all information related to the receipt of money was correctly reflected in the reports.
• Sales tax collected. It is important to check that the reports correctly indicate the indicator that reflects the amount of tax collected. All funds recovered must be included in gross income.
• TMZ. This indicator should be estimated at the beginning of this year. It must be compared with the size of the final profit for the past year. They should be the same.
• Purchases. If, in the course of business, the founders of the company purchase something for personal use, the amount of money spent should be excluded from the cost of products sold.
• TMZ at the end of the year. It is necessary to ensure that all of the company's inventories are accounted for in accordance with established requirements. Required condition is to use the right pricing methodology. To confirm the size of existing inventory items, an inventory list is sufficient.

1. Checking the correctness of the calculations made. If the company is engaged in wholesale or retail, the recalculation will not take much time. All you need to do is divide your gross income by your net profit. The resulting value is expressed as a percentage. It reflects the difference between the cost products sold and its nominal price.
2. Add. sources of gross profit. If a company receives income from sources unrelated to its core business, such income must be added to gross income. The result of the addition is gross income.

Gross profit - calculation formula

VP = D – (N + W), Where:

• VP – gross profit;
• D – the number of manufactured goods sold (in value terms);
• C – cost of manufacturing goods;
• Z – production costs.

To make the calculation, you need to subtract the cost of goods sold from the amount of revenue.

Gross profit - balance sheet formula

Gross profit (p. 2100) on the balance sheet is calculated as follows:

revenue (p. 2110) – cost of sales (p. 2120).

To carry out a competent calculation of the amount of gross profit, it is necessary to study in detail all the cost items included in the cost of goods.

Profit call the difference between the income from an activity and the costs of this activity.

This is the general interpretation of the concept. However, in the process of further consideration, there is no unanimity of opinion either in theory or in practice.

Types of profit and methods of their calculation

It can be said that most of directions to economic science one way or another considers the mechanisms of formation and distribution of profit, without giving unambiguous practical recipes for the most successful method of activity.

Probably the only thing that supporters of all economic theories agree on is the way to calculate income, expenses and profits in monetary units and the recognition of the fact that any economic activity for which the costs, in general, exceed the income from it does not make economic sense.

According to some theories, profit is possible only as a result of violation market equilibrium due to improved external conditions or useful innovation (more effective methods production, cost reduction, etc.). In all other cases, competition brings the market to a state of equilibrium with zero profitability. What remains with the owners of enterprises after paying all expenses is proposed to be considered the income of the entrepreneur, something like the salary of an executive based on the results of work. Some theories consider profit to be the price paid for entrepreneurial risk, personal efficiency, and the use of capital. Obviously, for a practical understanding of the issue, it is not necessary to go deeply into economic theory, it is enough to know and understand some common definitions

It is customary to distinguish the following types of profit:

• Accounting profit (BP)- That's for sure a certain amount between cash receipts (D), which according to the rules accounting, are considered income from activities, and costs, which, according to the same rules, should be considered expenses (R),

BP = D - R;

• Economic profit (EP)- a less clear indicator, based, to a large extent, not only on accounting data, but also on expert assessments. Such estimates may include: unaccounted expenses, the cost of possible risks and additional features, lost profits, otherwise economic costs (EI), i.e. expected result from using funds in some other way

EP= D - EI;

• Gross (total) profit (GP)- amount of income (revenue from the operation) (D) minus expenses (R), i.e. the cost of this operation. Calculated using the same method as accounting profit;
• Operating profit (OP) - the indicator is similar to the one given above, however, from it it is customary to subtract not only the cost of a specific action, but also operating costs (OI), i.e. some operating expenses for core activities

OP = D - R - OI;

• Net profit (NP)- the remainder of the income after paying all expenses (∑Р), including taxes and deductions from profits,

PP = D - ∑R.

In addition to assessing efficiency and accounting for funds, the methodology for determining the amount of profit becomes necessary for the correct calculation of taxes. In Belarus, this aspect of accounting is regulated by the Tax Code of the Republic of Belarus and other legislative acts.

Enterprise profit

For commercial organization profit is a mandatory goal of activity. To a certain extent this is also true for state enterprises, although their tasks may differ in many ways, the profit received is also recorded in accounting and distributed according to statutory documents. In addition, economic activities are often carried out by public, charitable, and religious organizations, but all their income must be spent on non-commercial purposes in accordance with the law and internal rules. In this case, we can only talk about accounting profit.

For an enterprise, the planned profit is important as a guideline for drawing up interim plans: supply, production, warehousing, transportation, sales, etc. At the next stage of the economic cycle, the actual profit received must be distributed in accordance with the goals of the enterprise and the prevailing conditions.

To check the effectiveness of business management, it is useful to compare the planned profit with the received one. In order to better understand and optimize the system of economic processes within and, to some extent, in external environment organizations use special methods, in particular factor analysis. Its purpose is to assess the influence of each of the factors economic system to the amount of final profit. This is convenient to do when comparing items of the same name profit and loss statement (OPL) in the past and base periods. This method cannot promise absolute accuracy of results, because It can be difficult to isolate the degree of influence of each factor separately.

Profit functions

All ways to use profit can be grouped into two general categories: consumption and. If consumption means the withdrawal of funds from the enterprise, then investment involves the further development of the economic system.

The fact is that it is profit that provides the source of funds for further development It is easy to verify by considering the opposite situation: if in a periodically repeating economic process all the goods produced (revenue) are spent to compensate for the costs incurred, then the system does not have free resources for development and is reduced to repeating the same cycle. Under favorable, stable conditions, this cycle can be repeated for quite a long time. However, changing these conditions will sooner or later require funds to rebuild the system, which an enterprise operating without profit cannot provide. This usually leads to either closure, downsizing, or a change in ownership of the organization.

All common methods of obtaining funds for the development of an enterprise can be presented in the form of several general directions:

• Financing from your own accumulated profits is the safest and cheapest option. If it fails, the organization only risks the value of its investment;
• Involvement of external, for example -. In this case, you need to prepare for a return from future profits of both the funds received and the loan fee. Attracting financing through the sale of a share in the ownership of the enterprise does not change the essence, or the investment pays off with growth net income, or we should talk not about development, but about losses;
• Selling parts own property. Loss of property involves loss of income from the use of the property sold. It is possible to compensate for a drop in income only by increasing overall profits.

In this way, they ensure the attraction of funds for the development of a private organization. Modernization of state-owned enterprises, including with a “socialist” approach to financing, ultimately also comes down to obtaining additional profit, only the scope of the project expands in accordance with the scale of the owner. In this case, it is possible to compensate for the costs both from the income growth of the modernized enterprise and the economy as a whole. However, investing without income growth exceeding expenses is also considered economically senseless.

In addition to investing the profits within the organization, external investment may be beneficial. In this case, funds withdrawn from one enterprise are invested in another. This can be a source of additional benefit for the owner of the funds, the recipient of investments and the economy as a whole, due to the redistribution of funds to the most profitable projects.

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Reading time: 9 minutes. Views 295 Published 07/01/2018

In order to lead successful business in severe economic conditions, an entrepreneur must have financial literacy and leadership qualities. Otherwise, the company will face inevitable bankruptcy. Ignorance of the laws of commercial activity is an unaffordable luxury, which can cause disastrous results. In this article we propose to discuss the question of what is net profit in simple words

understandable to every layman.

Net profit is the amount that remains after the formation of the wage fund and payment of taxes, deductions, and mandatory payments

What is net profit Net profit is the portion of revenue that remains after deducting all production costs, utility bills and tax contributions. These funds are used to develop new markets, increase production capacity

and employee incentives. The amount of net profit influences the methodology for calculating dividends that are paid to holders of securities and founders of the company. Also, these funds are used to create internal funds in order to increase the size of non-current assets and increase the volume of manufactured products., the amount of net profit is one of the important indicators for every organization conducting business activities. An increase in profit margin indicates production efficiency. The opposite dynamics indicate that the company is on the verge of bankruptcy. In order to determine the amount of net profit, it is necessary to obtain information about the volume of gross income. Gross income is the amount Money

received from the sale of commercial products or services. It should be noted that this item of the company’s income does not include the cost of the products that were returned by consumers.

• After determining the amount of gross income, the amount of production costs is calculated. These actions make it possible to determine the size of the gross profit, which is the difference between income and the cost of production. Next, you need to determine the amount of additional costs, which include:
• spending on developing new markets;
• costs of concluding contracts with counterparties;
• Unexpected expenses;

costs of paying penalties from regulatory authorities. The net profit of an enterprise is the result of subtracting the cost of goods from the gross income.

A negative value of this indicator demonstrates the company's unprofitability. Each entrepreneur independently chooses different methods of using the funds received. Financial resources can be directed both to the creation of internal company funds and to savings accounts. Some entrepreneurs donate part of their net profits to charitable organizations.

How to calculate (formula)

In order to calculate the amount of net profit, all production costs, as well as costs associated with paying taxes, should be subtracted from income.

It should be noted that there are several different methods for compiling calculations, which are united by a single economic meaning.

You can also use the formula: “FP+VP+OP-SM=PE”. In this formula, “FP” reflects the amount of financial profit, “VP” is the gross profit, and “OP” is the amount of operating profit. The tax amount should be subtracted from the result of adding these indicators.
Net profit is one of the important economic indicators, which is displayed in the last line of the balance sheet. The balance formula is as follows:

STR2110-STR2120-STR2210-STR2220-STR2310-STR2320-STR2330-STR2340-STR2350-STR2410=STR2400, where:

1. STR2110– the amount of revenue received.
2. STR2120– cost of sales of products.
3. STR2210– volume of commercial expenses.
4. STR2220– management costs.
5. STR2310— the amount of income received through participation in third-party projects.
6. STR2320– interest received.
7. STR2330– interest paid.
8. STR2340– amount of other income.
9. STR2350– amount of additional expenses.
10. STR2410– the amount of taxation.
11. STR2400– the amount of net profit.

STR2400 net profit (loss) is the amount of money remaining after paying taxes and insurance premiums.

Receipt scheme

In order to determine the amount of cash that remains with the enterprise, it is necessary to find out the amount of revenue received through the sale of marketable products . From this indicator, you should subtract the cost of production of this product and the amount of operating costs. These actions allow you to find out the amount of profit received from the sale of commercial products.

At the next stage of calculations, the volume of operating income and expenses should be subtracted from the profit received by selling products. These actions allow you to determine the amount of profit received through financial and economic activities. Next, from this indicator you should subtract the amount of non-operating income and expenses, taxable profit and the amount of the tax itself. All of the above actions are a scheme for obtaining a state of emergency.

Place of net profit in the income accounting system

PE is one of the important indicators of economic analysis of a company’s performance. In order to understand the place of net profit in the income accounting system, one should study the relationship between private equity and other types of income. Below we have provided a visual diagram that demonstrates the relationship between each type of profit:

Net profit is the difference between the company's income from sales of products and the costs of its production

Each of these economic indicators provides information about the efficiency of the company's economic activities. Marginal profit demonstrates the effectiveness of sales of goods. Operating profit provides information about the efficiency of operating activities. Taxable profit is the amount of money that does not take into account income and expenses associated with additional activities companies. Considering all of the above, we can conclude that net profit is the amount of cash cleared from all expenses incurred by the company.

How it is used (directions, purposes)

As practice shows, each entrepreneur independently decides where to send the received emergency funds. It can be used to pay off existing debt obligations or create a fund that will be used to further promote the company in the market. It should be noted that in current legislation There is no regulation regulating the procedure for distributing emergency situations. According to the established rules, available financial resources must be used to cover needs that do not contradict the letter of the law.

Most organizations use PE to create a social or investment fund. In addition, these monetary resources are used in the formation of reserve capital and payment of dividends to securities holders. If there is financial opportunity, cash flow may be aimed at increasing the volume of the authorized capital.

Methods for analyzing net profit

Today, economic analysts use two main methods for estimating net profit.

This is the most important indicator for any business, as it reflects its profitability

Factorial

The main purpose of compiling these calculations is to determine the reasons for changes in profit. If net profit has decreased, this indicates a possible depreciation of funds or changes within the enterprise. All factors influencing the size of the emergency are divided into two groups: external and internal causes. The category of external factors includes changes in current legislation, natural disasters, market changes, increased competition and changes in the terms of agreements with counterparties. In addition, one should take into account rising prices for raw materials, Consumables, communal payments, as well as the country's politics.

To the group internal factors This may include changes in staffing, a decrease or increase in production capacity, as well as an increase in rent. In addition to all of the above, one should take into account the rise or fall in the cost of the product itself and the amount of taxation. During the factor analysis you should take into account the cost of the product itself, the amount of associated costs, the amount of revenue received from the sale of products and additional costs.

Statistical

This type of economic analysis is carried out to study the structure and amount of profit that a company receives over a certain time period. This assessment provides information about the effectiveness financial relations and profit dynamics. Carrying out statistical analysis

allows you to determine the financial stability of the company and assess the feasibility of using monetary resources. In addition, this operation allows you to obtain information about the structure and dynamics of balance sheet profit.

Is there a connection with credit rating? Quite often you can hear the question about the relationship between emergency situations and credit rating. As practice shows, this indicator is one of the important elements of economic analysis. It is this element that allows us to determine the investment attractiveness of the project as domestic market

, and in the international business community. Below is a comparison of the dynamics of the state of emergency of the company OJSC Rosneft and its:

credit rating

Gross profit is the difference between the income received from the sale of products and the costs of its production reflected in the balance sheet

How to increase your net profit As mentioned above, the state of emergency is one of the most important economic indicators that clearly demonstrates the company’s income level. If the company's profit increased during the reporting period, we can conclude that high demand products on the market. Majority large companies cooperate with special agencies that develop various strategies aimed at increasing income. Small manufacturing enterprises do not have the required quantity financial resources

, which can be used for cooperation with such agencies. It is this factor that contributes to the increasing relevance of the issue of methods for increasing income. For this purpose, it is necessary to conduct an internal analysis and evaluate the work of the marketing department. Next, you need to develop a strategy that will reduce production costs and increase the number of products sold. These preventive measures are carried out by all entrepreneurs. However, many private company executives pay little attention to the invisible factors that affect income.

You can increase the company's income by laying off employees and lowering wages. In addition, it is necessary to optimize inventory and increase margins. Improving product quality coupled with reducing production costs makes it possible to increase the capacity of the enterprise, which will have a positive impact on the amount of income. Increasing labor productivity and introducing new technological processes allows you to significantly increase the amount of money received. In addition to all of the above, the company’s management needs to take measures aimed at developing new markets and expanding.

trading network

An increase in net profit indicates an increase in production and sales, a reduction in costs, an improvement in the properties, characteristics and structure of products

Conclusions (+ video) Summarizing all of the above, we can conclude that the emergency is complex economic concept

. Today, the current legislation does not have a definition of this indicator and no regulations governing the use of funds. It should be noted that this indicator does not always reflect information about the quality of the company’s work and the effectiveness of the production process.