The difference between income, profit and revenue

Every entrepreneur should know what is the income and profit of the enterprise, as well as how they differ from revenue.

Profit and income are the main financial indicators of the economic activity of various organizations, regardless of the form of ownership. They can give an idea of ​​the overall profitability of the enterprise.

The costs of social and industrial development of the firm must be financed from profits. The source of financing of the state budget is the corporate income tax.

What is revenue (turnover)

Proceeds - funds received (proceeded) by an enterprise, firm, entrepreneur from the sale of goods and services, proceeds from sales. That is, this is the entire amount of money that turned out after the sale of the goods.

Example of revenue (turnover), Petya sold 100 phones for 10,000 rubles. The revenue will be 100 * 10,000 = 1,000,000 rubles.

Revenue from the sale of certain products is divided into two main types - net and gross:

• Under Net Revenue means the amount of money after all kinds of deductions, taxes, discounts and the cost of the returned goods.
• Gross revenue- is the total amount of cash receipts after the sale of certain products or services.

Income \u003d is revenue (turnover) - the cost price (or purchase price) of goods or services. Taxes are also deducted from this amount. Material costs are the funds that were spent on the purchase of products or the necessary equipment. Such costs include a variety of social contributions. Payroll has nothing to do with this category.

Income Example, let's say the cost of Petya's phones is 5000 rubles. Only 100 pieces, which he sold for 10,000 rubles each. Then income \u003d 100 * (10,000 - 5,000) \u003d 500,000 rubles.

Labor costs and profits are the main components of the income of a particular enterprise. The market value of the goods and the general market conditions have a direct impact on the level of income of the organization. Possible receipts from individuals and legal entities do not belong to the revenue side of the company.

If the income is subject to tax payments, then after their deduction there remains an amount that includes the following elements:

• insurance and investment income. These are the amounts received in the course of investment activities and the cost of insurance premiums.
• Consumer funds whose activities require spending on the social sphere.

Income can be marginal, total and average.

• marginal revenue is the difference by which the total income of the organization changes after the sale of a certain unit of goods. Demonstrates the overall payback of the company.
• Total income- this is the final result of the economic activity of the company, the difference between the cost of goods and production costs.
• Average income received after the sale of one unit of goods. It is equal to the price of a particular sold product.

Experts also distinguish the concept of other income. These include a variety of penalties, interest for placing a deposit.

What is profit

Profit is the difference between costs and revenues, where the latter are an indicator of financial activity.

Profit example, Petya's income from the sale of phones amounted to 500,000 rubles. But you still need to pay taxes, pay the salary of the manager, pay the rent, etc.

Maximizing profits has always been one of the main goals of a successful businessman. It is considered the most important estimated generalizing indicator of the activity of a particular company.

This concept includes the following main components:

• Profit from the sale of property and the sale of material assets.
• Funds that were received from additional (non-core) activities of the organization. This refers to securities, dividends, funds from the rental of real estate.
• The difference between the funds that were received from the sale of a certain product and its present value.

If it was found that the profit of the enterprise is zero, the costs can be considered the result of such economic activity. The limiting indicator of this concept can be obtained by selling an additional copy of the product.

There are several main functions of the profit of the enterprise:

• Provides funds for the development of the company.
• Forms taxes on the profits of commercial enterprises.
• Shows the final economic result of the activities of a conventional enterprise.

For productive profit management, experts recommend taking into account its marginal indicator, which you need to focus on. Some heads of firms actively practice lowering the price policy. But this should not be exacerbated. With a large demand for goods, the profitability of the enterprise as a whole can drop catastrophically.

Experts advise offering their customers inexpensive analogues of goods and services that are considered the most in demand. Such measures will help maintain the attractiveness of products and the normal price category.

This financial indicator has several classifications. As a result of economic activity:

• Minimum allowable and maximum possible, which occurs at minimum cost and maximum profit.
• Regulatory- This is the standard minimum indicator provided by the enterprise.
• under-received- a loss that was formed due to the fact that one of the participants in the transaction violated its obligations.

Profits may or may not be taxed. It is differentiated into economic and accounting, depending on the costs. The first is the difference between accounting profit and additional, forced expenses.

As for the second option, it is positioned as the difference between the costs incurred and the income of the enterprise.

Gross profit is the difference between the total income of a particular organization and the amount of costs. Net income can be calculated by subtracting all related expenses from gross income.

About EBIT and EBITDA earnings

These are two more types of profit, which should be separately emphasized.

Profit EBIT is positioned as an intermediate value between gross and net indicators. Some believe that this is operating profit and are mistaken. This concept can also include non-operating profit. The amount of EBIT profit can be calculated based on the sum of profit and loss before taxes. This indicator must be positive.

The value of profit directly depends on the depreciation rate and how it is calculated.

EBITDA is earnings before interest, depreciation and taxes, showing only cash inflows. This analytical indicator is calculated on the basis of the financial statements of an organization and is the main indicator of how profitable the company's activities are as a whole, regardless of various debts and depreciation methods.

Having determined EBITDA, it is possible to calculate the organization's debt burden. To do this, the debt indicators are divided by the nominal profit.

The indicated values ​​of EBIT and EBITDA are reduced to one - "reduction to a common denominator" of economic indicators of organizations from different countries. The tax systems of different states are not similar to each other. This means that income tax rates will also not be equivalent. The introduction of EBIT and EBITDA profits into accounting practice makes it possible to correct this situation.

Experts in the economic field have a generalized point of view on how to maximize profits for a particular firm. Marginal revenue must be equalized with marginal cost. In this case, the profit of the enterprise should be maximum. But still it is individual for different organizations.