6 Profit And Loss

6 Profit And Loss



Profit and Loss
It might seem like a​ no-brainer to​ define just exactly what profit and loss are .​
But of​ course these have definitions like everything else .​
Profit can be called different things, for a​ start .​
It's sometimes called net income or​ net earnings .​
Businesses that sell products and services generate profit from the sales of​ those products or​ services and from controlling the attendant costs of​ running the business .​
Profit can also be referred to​ as​ Return on Investment, or​ ROI .​
While some definitions limit ROI to​ profit on investments in​ such securities as​ stocks or​ bonds, many companies use this term to​ refer to​ short-term and long-term business results .​
Profit is​ also sometimes called taxable income.
It's the job of​ the accounting and finance professionals to​ assess the profits and losses of​ a​ company .​
They have to​ know what created both and what the results of​ both sides of​ the business equation are .​
They determine what the net worth of​ a​ company is .​
Net worth is​ the resulting dollar amount from deducting a​ company's liabilities from its assets .​
In a​ privately held company, this is​ also called owner's equity, since anything that's left over after all the bills are paid, to​ put it​ simply, belongs to​ the owners .​
In a​ publicly held company, this profit is​ returned to​ the shareholders in​ the form of​ dividends .​
In other words, all liabilities have the first claim on any money the company makes .​
Anything that's left over is​ profit .​
It's not derived from one element or​ another .​
Net worth is​ determined after all the liabilities are deducted from all the assets, including cash and property .​
Showing a​ profit, or​ a​ positive figure on the balance sheet, is​ of​ course the aim of​ every business .​
It's what our economy and society are built on .​
It doesn't always work out that way .​
Economic trends and consumer behaviors change and it's not always possible to​ predict these and what income they'll have on a​ company's performance .​




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