The immediate goal pursued by anyproduction, in what is called a market economy, is profit. It creates some guarantees that the company will continue to exist in the future. This is due to the fact that the accumulation of profits in the form of different reserve funds can help overcome all the consequences of the risk associated with the sale of goods.
Revenues and profits are different concepts. In the market, companies usually act as relatively separate commodity producers. They set the price for their products, then sell it to the consumer, as a result of which money proceeds come to them. But this does not mean that a profit is obtained. In order to identify the financial result, you need to compare the costs of production and sales (they take the form of cost) with revenue. If the revenue is higher than the cost price, the financial result is profit. If it is equal to the cost, then you can only reimburse all costs for sales and production. But if the costs exceed the revenue, as a result, the company receives losses, the so-called negative financial result.
Revenue is nothing more than a monetaryreceipt due to the sale of products in the relevant market. A gross revenue - is the revenue that can be called the total, received by the enterprise from the sale of works, goods, services and their own material assets.
The gross income of a firm is the revenue from the entire activity of the firm for a specific period of time. And the average income of the firm is revenue calculated only for the unit of output that is sold.
So, if the gross income is cleared of costs (costs), the final result of the activity of an enterprise will be profit or loss.
What is the essence of profit and its functions? Currently, it is the source of innovative activity and the work of the entrepreneur himself; its ability to navigate in conditions of uncertain economic circumstances and risk payment; the income received from application of investments, the capital in manufacture; monopolism, that is, the economic power of the firm over the market.
In an effort to profit, the enterpriseimproves its production, and, consequently, the growth of investments is stimulated, which lead to a significant increase in production volumes and the expansion of jobs. As a result, not only the industry develops, but also the national economy as a whole.
The profit performs such functions: informational, stimulating and distributive. It is divided into several varieties:
1. The arithmetic. It is a question of the difference between costs and income. Costs are usually different, but income is expressed as gross income, that is, total. Therefore, profits are considered differently.
2. Normal. This refers to the normal, necessary income that occurs when you run a particular business. The magnitude of this profit is dependent on the loss of profits, that is, the entrepreneurial spirit of the businessman and the alternative possibilities of capital application.
3. The economic. This refers to the difference between economic costs, which include normal profit and gross income. It is also called super profit.
4. Economic. It's about the sum of economic and normal profits. This is nothing more than the initial basis in the process of distribution and use of the company's profits.
5. Accounting. Calculated by this criterion: you need to subtract from the gross income the explicit costs of the purchased (external origin). But if from this kind of profit to take away implicit costs, the result will be a net economic profit.