Profit and profit are the key indicators of the company's activity

The main goal of the enterprise is income and profit. What is the difference between profit and revenue?

Income is the main source of the formation of financial reserves, as a separate enterprise, and the state budget. The use of income as a key indicator of the effectiveness of activities makes it possible to establish a real economic effect on the performance of each individual enterprise.

Profit is the key financial indicator that reflects the result of the organization's activities. Revenue and profit are interrelated. In the conditions of the market, the net income is presented in the form of profit. The unity of functions that performs income and profit in their mutual conditioning makes them their economic elements that reflect the economic interests of society, enterprises and each employee. In this regard, the problem of the formation and redistribution of income, as well as its solution in practice, ensures the dependence of the enterprise's activities on the amount of income received and remaining available.

In a market economy, enterprises are relatively independent. By setting the price for their products, they sell it, receiving in return cash revenue. However, this does not mean profit. In order to determine the economic effect of the enterprise, it is necessary to compare the revenue from production and sales of products with incurred costs, this is the cost of production.

The enterprise always aims at its own profit and profit in its activities, but it does not always get it in all cases. In order for this to happen, revenue should exceed cost, in which case the economic result of the enterprise speaks of making a profit. In the case where revenue covers the cost of production, you can only talk about reimbursement of costs for production. In this situation, there is no profit, and hence the source of the development of the enterprise. If the costs exceed the revenue from the sale of goods and services, the organization incurs losses, which indicates a negative position of the organization and alleged bankruptcy.

The total revenue of the enterprise includes income and profit. The profit continues to participate in the turnover, as part of it is included in the payment of tax payments. As a result, the enterprise has the net profit amount , that is, the difference between the final financial result and the amount of taxes paid.

What is gross income and gross profit?

Gross income is an income that is calculated in monetary terms, which the enterprise usually receives from the sale of products. The term "turnover" is a synonym for "gross revenue". Under the amount of gross income, either the whole of its total amount or for a specified period of time can be assumed.

Gross profit represents the difference between net income and the cost of production of sold products. At the same time, the prime cost does not include wages, taxes and other overhead costs.

As part of the transition to market conditions, income and profit have become the driving force of entrepreneurial activity. They determine what is best to produce, how, do it and for which customers produce. The receipt of income is a key goal of the enterprise, since it serves as a source of its development. The increase in income forms the basis for self-financing, which is the main condition of economic activity. This is based on the principle of full recoupment of expenses for production and expansion of the production base of the organization.

In the growth of profit indicators, enterprises are interested in both the enterprise itself and the state, in connection with the increase in the tax base. Thus, income is the main factor in assessing economic activity.