What is profit?
Profit is the money you have left after paying for business expenses. There are three types of profit: gross profit, operating profit 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.