Profit is the difference in income and expenses from the production or financial activities of a business entity. This indicator reflects the coefficient of efficiency from the implementation of activities by the entrepreneur and characterizes the excess of revenue over expenses.
Depending on the calculation method and direction of distribution, the following types are distinguished: balance sheet (gross) profit, operating profit, as well as after taxation and from ordinary activities.
Gross profit is calculated as the difference between net income and cost of sales. At the same time, in addition to production costs, resource payments and local taxes are included in the cost. Thus, the amount of retained earnings is reduced by these payments.
Operating profit is the balance sheet profit, which is adjusted for the corresponding operating income and expenses, and is an indicator of the effectiveness of the existence of any business entity. Also, this indicator shows the success of the production activities of the company without taking into account the influence of external indicators.
Profit from ordinary activities shows operating, adjusted for the amount of the difference in financial income and expenses. This indicator is the amount with which the tax is directly charged.
Financial income includes: income received from investing in other companies, dividends, borrowed interest, income from exchange rate differences and others. In financial expenses are taken into account: payment of interest on loan capital; losses resulting from the devaluation of financial investments, fixed assets, as well as expenses that are not related to the operating activities of the enterprise.
Net profit is one that will be available to a business entity after tax has been paid. The company uses the amount received for personal purposes in two directions:
- accumulation fund - for the development of production, investment of other business entities and the creation of a reserve fund ;
- consumption fund - to pay interest to shareholders, material incentives for employees according to the results of work, as well as any charity.
The profit of the enterprise is a positive result of the activities of a business entity obtained from operating activities, and is generated from such sources:
- due to sales of products - displays the difference between revenue from delivery excluding VAT and the total cost of production;
- from the sale of property - calculated as the difference between the sale price and the residual value of the property being sold;
- due to non-operating operations - income received from the joint activities of business entities, interest on stocks, fines, debt obligations.
Bank profit is the difference between the interest received by the bank for the money provided to it and the percentage that it pays for the money received by it minus the costs associated with its activities.
With the help of banks, the bulk of the credit resources of any country are concentrated. These financial institutions carry out banking operations in a wide range, and also provide financial services to legal entities and individuals.
All banking institutions are divided according to the following criteria:
- form of ownership - joint-stock, state, mixed;
- types of work performed - universal and specialized (for example, investment, trading, mortgage, etc.);
- Territorial principle - national and regional.
Thus, profit is the main goal of the enterprise; to maximize it, various companies are organized or combined.