Profit

What is profit

Profit is the financial gain obtained by deducting total expenses from revenue generated by the business. It is an end result of efforts put in to sustain & grow the business organization. Profit gained in the business is the owner’s wealth who may or may not decide to re-invest again in the same business for future growth.

The difference between the amount invested & amount spent in a business entity determines profit margin. The Profit margin is the best indicator of the financial health of the business. If the profit margin is good, then we can assume that all the business processes are running in streamline & furthermore firm can re-invest this profit margin in order to grow further.

Profit Formula:-

  • Percentage Profit = (Total Sales-Total Expenses)/Total Sales.

For example:

Suppose a business entity generated $500 Sales in its business operation & total Expenses accrued are $400 to run the business then the profit percentage of business is 20%.

  • Percentage Profit= ($500 Sales – $400 Expenses) / $500 = 20% .

More the Sales keeping expenses under control more will be the profit.

  • It indicates how much percentage of sales have turned into profits. In simple term, the percentage figure indicates how much profit the business has generated for each dollar of sale.

Why Profit is important?

The success of a business depends on its ability to generate profit & maintain its equity to remain competitive. Earning a profit is important to determine financial security from the bank & attract investors.  A business owner must understand the importance of generating profit & develop long-term strategies. That will give the company the best chance to remain competitive.

Business growth:

  • Making profit is very much essential for future growth & expansion of the business.
  • Earning more profit allows a business entity to operate in another business location. Diversify business model & allow firms to take extra risk for developing future business plans.

To Borrow money from financial institutions:

  • To start business operations, the firm needs finance from financial institutions like banks or other financial institutions.
  • Profit is a very crucial factor which will decide whether banks will lend money or not.

Attract investors to invest in the company:

  • A firm who have sustainable & a consistent profit margin usually attract more investors. Because investor believes that investing in the profitable firm will pay attractive returns.
  • As a business owner, you should always try to gain investor’s confidence by putting efforts to increase profit margin.

Profit


Profit is like a foundation or base of the business entity, more strong the base, stronger will be its empire.

 

18 thoughts on “Profit”

  1. Thank you, I’ve recently been searching for info approximately this subject for ages and yours is the best I have came upon till now. But, what about the bottom line? Are you certain about the supply?

  2. Thank you for the sensible critique. Me & my neighbor were just preparing to do a little research about this. We got a grab a book from our local library but I think I learned more from this post. I’m very glad to see such wonderful information being shared freely out there.

  3. An interesting discussion is definitely worth comment. I do believe that you need to write more about this subject matter, it might not be a taboo subject but usually folks don’t talk about these subjects. To the next! Many thanks!!

  4. Hey There. I found your weblog the use of msn. That is an extremely
    neatly written article. I will make sure to bookmark it and come back to learn extra of
    your helpful info. Thanks for the post. I’ll certainly comeback.

  5. I’m impressed, I must say. Rarely do I come across a
    blog that’s equally educative and interesting, and let me tell you, you’ve hit
    the nail on the head. The issue is something that too
    few men and women are speaking intelligently about. I am very happy
    that I stumbled across this during my search for something regarding this.

  6. Write more, thats all I have to say. Literally, it seems as though you relied on the video to
    make your point. You obviously know what youre talking about, why waste your intelligence on just posting videos to your weblog when you
    could be giving us something informative to read?

  7. Hi there to every body, it’s my first pay a
    quick visit of this website; this blog consists of awesome and really excellent material in support of visitors.

  8. Hey! Would you mind if I share your blog with my facebook group?
    There’s a lot of folks that I think would really appreciate
    your content. Please let me know. Cheers

  9. Fantastic beat ! I would like to apprentice even as
    you amend your website, how can i subscribe for a weblog website?

    The account helped me a applicable deal. I have been a
    little bit acquainted of this your broadcast provided shiny clear idea

Leave a Reply

Your email address will not be published. Required fields are marked *