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One question, is how is "profit" defined? For example, if a company has surplus cash based on a given base of assets and current operating expenses, then that
by derekp7 8y ago
One question, is how is "profit" defined? For example, if a company has surplus cash based on a given base of assets and current operating expenses, then that surplus is typically profit. However, if that surplus is used to buy new assets or pay down debt principle, I would consider that to be similar to profit because it tells me that the company would be profitable if it wasn't expanding (or, that it will be profitable once the debt is paid off, assuming all else remains the same).
- gamblor956 8y agoProfit means income exceeds expenses for a given period of time. There are different types of profit, i.e., gross profit, is just the profit on the primary business activity (sales or services income), while net profit is the profit after all expenses are taken into consideration. There's also cash-flow profit, which is gross profitability adjusted for some but not all non-operating expenses. And just to make things even more confusing, there's unicorn accounting profit, in which gross bookings as treated as revenue even though they are never earned by the startup (think Groupon, GrubHub, etc.).
- unparagoned 8y agoIts defined by whatever accounting standard they are used. Profit is usually income less costs required to bring in that income. In your example the that surplus isn't profit. That's more of a balance sheet item, so an asset. If you have $10m in cash and buy say a factory, that doesn't effect your profit