profit

Difference between the selling price and the production cost, the latter enompassing all the fixed and variable costs incurred in the process of producing and delivering the product or service. A more refined definition of profit is that of net profit. This is the income remaining after all costs have been subtracted. The net profit figure may be stated as being before or after tax. Operating profit is a term used to define profit (or loss) arising from the principal trading activity of a company. Operating profit is calculated by deducting operating expenses – expenses vital to core activity – from trading profit – profit before deduction of items such as auditors fees, interest etc.

Normal profit is the profit needed to keep a firm from switching its resources into the production of other goods and services. Abnormal or supernormal profit is profit earned over and above normal profit. Pre-tax profit is profit before corporation tax and any other taxes on profit have been paid; post-tax profit is profit after tax. Retained profit is profit not distributed to shareholders but kept back to invest in the business.