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Profit (accounting)

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Profit, in accounting, is an income distributed to the owner in a profitable market production process (business). Profit is a measure of profitability which is the owner's major interest in the income-formation process of market production. There are several profit measures in common use.

Income formation in market production is always a balance between income generation and income distribution. The income generated is always distributed to the stakeholders of production as economic value within the review period. The profit is the share of income formation the owner is able to keep to themselves in the income distribution process. Profit is one of the major sources of economic well-being because it means incomes and opportunities to develop production. The words "income", "profit" and "earnings" are synonyms in this context.

Other terms

Net sales = gross sales – (customer discounts, returns, and allowances)
Gross profit = net salescost of goods sold
Operating profit = gross profit – total operating expenses
Net profit = operating profit – taxes – interest
Net profit = net salescost of goods soldoperating expense – taxes – interest

See also

Footnotes

References

  • Courbois, R.; Temple, P. (1975). La methode des "Comptes de surplus" et ses applications macroeconomiques. 160 des Collect,INSEE,Serie C (35). p. 100.
  • Craig, C.; Harris, R. (1973). "Total Productivity Measurement at the Firm Level". Sloan Management Review (Spring 1973): 13–28.
  • Genesca, G.E.; Grifell, T. E. (1992). "Profits and Total Factor Productivity: A Comparative Analysis". Omega. The International Journal of Management Science. 20 (5/6): 553–568. doi:10.1016/0305-0483(92)90002-O.
  • Gollop, F.M. (1979). "Accounting for Intermediate Input: The Link Between Sectoral and Aggregate Measures of Productivity Growth". Measurement and Interpretation of Productivity. National Academy of Sciences.
  • Hulten, C. R. (January 2000). "Total Factor Productivity: A Short Biography". NBER Working Paper No. 7471. doi:10.3386/w7471.
  • Hulten, C. R. (September 2009). "Growth Accounting". NBER Working Paper No. 15341. doi:10.3386/w15341.
  • Jorgenson, D.W.; Ho, M.S.; Samuels, J.D. (2014). Long-term Estimates of U.S. Productivity and Growth (PDF). Tokyo: Third World KLEMS Conference.
  • Kurosawa, K (1975). "An aggregate index for the analysis of productivity". Omega. 3 (2): 157–168. doi:10.1016/0305-0483(75)90115-2.
  • Loggerenberg van, B.; Cucchiaro, S. (1982). "Productivity Measurement and the Bottom Line". National Productivity Review. 1 (1): 87–99. doi:10.1002/npr.4040010111.
  • Pineda, A. (1990). A Multiple Case Study Research to Determine and respond to Management Information Need Using Total-Factor Productivity Measurement (TFPM). Virginia Polytechnic Institute and State University.
  • Riistama, K.; Jyrkkiö E. (1971). Operatiivinen laskentatoimi (Operative accounting). Weilin + Göös. p. 335.
  • Saari, S. (2006a). Productivity. Theory and Measurement in Business. Productivity Handbook (In Finnish). MIDO OY. p. 272.
  • Saari, S. (2011). Production and Productivity as Sources of Well-being. MIDO OY. p. 25.
  • Saari, S. (2006). Productivity. Theory and Measurement in Business (PDF). Espoo, Finland: European Productivity Conference.

Further reading and external links

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Profit (accounting)
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