What is the difference between earning and profit

Bookkeeper Education Bundle Bookkeeping Guidebook. Accounting Books. Finance Books. Operations Books. Articles Topics Index Site Archive. Profit, on the other hand, describes three important figures on the income statement for a business. These figures include gross profit, net profit, and operating profit. The term gross profit describes the sales efficiency of a business. It considers only the direct expenses related to producing a product to sell for profit.

A high gross profit means that the company is doing well in keeping production costs low while pricing the product as high as the market will bear at the same time. By analyzing its operating profit , a company can determine how well it manages its indirect costs. The steps involved in determining operating profit include subtracting every indirect cost from the gross profit. Examples of indirect costs include administrative costs, marketing costs, and depreciation.

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I Accept Show Purposes. Your Money. Personal Finance. Your Practice. Popular Courses. Table of Contents Expand. Other Variations. Key Takeaways Earnings and income both refer to a company's bottom line: the amount of profit left over after paying all expenses. Income can be designated as gross vs. Compare Accounts. The offers that appear in this table are from partnerships from which Investopedia receives compensation. This compensation may impact how and where listings appear.

Investopedia does not include all offers available in the marketplace. Related Articles. Financial Statements Gross Profit vs. Net Income: What's the Difference? Tools for Fundamental Analysis Operating Income vs. Partner Links. A company's earnings are its after-tax net income, meaning its profits. Earnings are the main determinant of a public company's share price.

Retained Earnings Definition Retained earnings are a firm's cumulative net earnings or profit after accounting for dividends. They're also referred to as the earnings surplus. Understanding Revenue Revenue is the income generated from normal business operations.