Getting a stable income is the main goal of any entrepreneur. Thus, the profit of an enterprise characterizes the positive result of its activities, which is obtained when incomes exceed costs.
Instructions
Step 1
The company's profit is the most important financial indicator of its activities. A company can make a profit only if the goods or services it produces are in high enough demand, i.e. satisfy the material and non-material needs of end users.
Step 2
The amount of profit is equal to the monetary value of the excess of income over expenses. The income of the enterprise is the proceeds from the sale of manufactured products. Expenses are the costs of production, which include the purchase of equipment, raw materials, depreciation of fixed assets, advertising and sale of the goods or services produced.
Step 3
Distinguish between accounting and economic profit. Accounting profit is the resulting income from the entrepreneurial activity of the enterprise, calculated according to the balance sheet data. This type of profit does not take into account costs that do not have documentary evidence, i.e. only those transactions that were reflected in the documentation in the form of accounting entries are taken into account. Amounts of lost profits (opportunity cost) are excluded.
Step 4
The economic profit of an enterprise is a financial value equal to the difference between the total income and expenses of the firm, taking into account the opportunity costs, i.e. economic profit is equal to accounting profit minus the estimate of lost profits. It is an important financial indicator that identifies a company's position in the market.
Step 5
A positive result indicates that it is in a financial equilibrium position. A negative value indicates that the company is facing bankruptcy if certain measures are not taken. Thus, economic profit is an indicator of the efficiency of the enterprise.
