This glossary uses Visual Finance™ to bring financial terms to life. Each example shows data from the Round Number Company, a fictional business with simplified figures to make learning easier. For more details, visit 'How to Read Visual Finance'.
The most common meaning of 'Profit' is Net Income - the income that is left over after all expenses (COGS, operating expenses, interest, and taxes) are deducted from sales.
calculation: Profit = Sales - Costs and Expenses
calculation: Profitability or Profitability Ratio = Profit/ Sales
Other names for Profit include Net Income, Net Profit, Earnings, or 'the bottom line'.
Other names for Profitability include Profitability Ratio, Return on Sales
There are other kinds of profit:
Calculation: Sales less COS less Operating Expense
| For a DIY Income Statement Calculator, including the different lines for Profit, go here. |
The above is our generic explanations of common corporate financial terminology. Actual meanings can vary widely from company to company; in order to have the correct internal definition you need to ask your Finance Department, "What do you mean by that?"
term list.