If you're a business owner, you have a greater understanding of terminology than those on the outside looking in possess. For example, you know that "profit" and "revenue," despite what many people believe, aren't the same. Robert Jain, as well as other names in the world of finance, can illustrate the differences between the two. For those that are looking to get into business, regardless of the specific industry, here is how these terms differ.
According to reputable names in finance, including Bob Jain, "profit" is a term that refers to the amount of money that's earned based on the initial expense that is put forth. In other words, if you put in money on a product, the amount that you would make back would be your profit. This amount is usually determined after one pays their expenses. These range from utilities to wages, which can add up.
It's worth noting that profits have different subtypes that are worth going into detail about. Net profits, for example, is determined by taking revenue and subtracting expenses, which range from taxes to utilities. Operating profit takes into account operating costs, including overhead. Gross profit focuses on the production of goods and associated costs. There is more to learn, but these are the general definitions to start with.
Now that you know what a profit is, let's discuss revenue. By definition, revenue is the total amount of money that a company brings in, typically in regard to the products and services that they offer and sell. It can also include any royalties that are paid to them by third parties, though this doesn't always apply. In any event, revenue is determined before any deductions are made, which is one of the main reasons it cannot be interchanged with profit.
Revenue will vary depending on the specific business being looked at, too. For example, if you were to operate a restaurant, your revenue would be generated by the cost of food and drinks that you offer. For someone that works as a landlord, revenue would refer to utilities and parking fees. These are just a few examples, but understand that revenue refers to the collective amount of money that a business is able to bring in.
According to reputable names in finance, including Bob Jain, "profit" is a term that refers to the amount of money that's earned based on the initial expense that is put forth. In other words, if you put in money on a product, the amount that you would make back would be your profit. This amount is usually determined after one pays their expenses. These range from utilities to wages, which can add up.
It's worth noting that profits have different subtypes that are worth going into detail about. Net profits, for example, is determined by taking revenue and subtracting expenses, which range from taxes to utilities. Operating profit takes into account operating costs, including overhead. Gross profit focuses on the production of goods and associated costs. There is more to learn, but these are the general definitions to start with.
Now that you know what a profit is, let's discuss revenue. By definition, revenue is the total amount of money that a company brings in, typically in regard to the products and services that they offer and sell. It can also include any royalties that are paid to them by third parties, though this doesn't always apply. In any event, revenue is determined before any deductions are made, which is one of the main reasons it cannot be interchanged with profit.
Revenue will vary depending on the specific business being looked at, too. For example, if you were to operate a restaurant, your revenue would be generated by the cost of food and drinks that you offer. For someone that works as a landlord, revenue would refer to utilities and parking fees. These are just a few examples, but understand that revenue refers to the collective amount of money that a business is able to bring in.
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