What is profit?
Profit is the money you have left after paying for business expenses. There are three main types of profit: gross profit, operating and net profit.
Gross profit is biggest. It shows what money was left after paying for the goods and services sold. Operating profit is next. It shows what's left after also paying operating costs such as rent, electricity, phones and in some cases staff.
Net profit comes last. It shows what you made after deducting all costs and tax. You get to hold onto net profit.
There are three types of profit. Net profit is what you get to keep.
The three profits are core measures of business success:
- Gross profit shows it is capable of making money
- Operating profit shows it is making money
- Net profit shows how much money it's making after taxes
See related terms
How to manage your finances and cash flow
Learn about money management for your small business
This glossary is for small business owners. The definitions are written with their requirements in mind. More detailed definitions can be found in accounting textbooks or from an accounting professional. Xero does not provide accounting, tax, business or legal advice.