At a Glance
A profit is a reward to a business owner for investing. It is described as the remaining revenue after all costs are deducted. The costs comprise materials costs, labour, taxes, salaries, etc.
Businesses essentially rely on three types of profits to examine their success. These include gross profit, operating profit, and net profit.
A Simplified Example
To better understand each of the profits, consider the income statement below for BNB Properties Vancouver:
BNB Properties Vancouver
What a profit means for your business
Using BNB Properties Vancouver's income statement, you can see that a gross profit means that your products' cost is less than what you sell them for.
An operating profit, on the other hand, means that your business can cover additional expenses apart from the cost of materials, shipping, and labour without running into a loss.
Lastly, the net profit is the final profit that shows what remains after every expense including taxes has been deducted. The net profit is what business owners take home as compensation for doing business.