Profit

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In the business context, profit means a financial gain or to put it more precisely, the surplus that is gained from a business activity and that remains after total costs of producing and selling goods and services are paid.

As can be seen from the introductory sentence, the words that are close in meaning to profit are gain or financial gain, financial benefit, surplus, earnings, yield, etc. Let us now look at some examples of how to use these words in context.

Last year, the company achieved a financial gain of almost £75 million.

The new programme is expected to result in a financial benefit of around £5bn.

The company has performed well this year, making a surplus of  £7.5m.

This transaction doubled the earnings of the Group.

We anticipate obtaining at least a 10% yield on our investment.

The word profit often emerges in the context of net profit, gross profit and operating profit, so let us look at the difference among these three terms. Gross profit, also referred to as gross margin or sales profit, is the difference between the company’s total revenue and the total cost of production and purchase of materials. When we deduct all fixed and variable expenses that are associated with the day-to-day operations of a business, e.g. utilities, payroll, rent, etc. from the gross profit, we get operating profit or recurring profit. Finally, net profit is the profit of a company after all expenses, operating costs, debts and taxes have been deducted. It is also referred to as net income, net earnings or the bottom line. You are also likely to come across the term pre-tax profit, very often abbreviated as EBIT, which stands for earnings before interest and taxes.

Here is the mathematical formula to explain it more clearly:

Total revenue – Cost of goods/services sold = Gross profit

Gross profit – Operating costs = Operating profit

Operating profit – Expenses and taxes = Net profit

In order to help you put these terms and phrases in sentences which you might use at a meeting when discussing business results, below you will find examples of the most frequent collocations of the term profit.

The holiday sale generated record profits.

Although it did not break records, the campaign brought in a healthy profit.

In the year ending 31 December 2016, the company earned a net profit of £75 million.

The company expects to make a gross profit of £75 million.

In the first six months, the sector realized a profit of over £5.2 million.

The subsidiaries earn an annual profit of £7.5m.

We are not interested in making a quick profit.

The company started to show a profit only in its second year.

We need to identify ways to cut costs and increase the net profit.

Autor: Jasminka Šturlić, prof. engleskog i talijanskog.

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