This article includes a list of references, related reading, or external links, but its sources remain unclear because it lacks inline citations. (May 2020) |
Profit, in accounting, is an income distributed to the owner in a profitable market production process (business). Profit is a measure of profitability which is the owner's major interest in the income-formation process of market production. There are several profit measures in common use.
Income formation in market production is always a balance between income generation and income distribution. The income generated is always distributed to the stakeholders of production as economic value within the review period. The profit is the share of income formation the owner is able to keep to themselves in the income distribution process. Profit is one of the major sources of economic well-being because it means incomes and opportunities to develop production. The words "income", "profit" and "earnings" are synonyms in this context.
Other terms
- Net sales = gross sales – (customer discounts, returns, and allowances)
- Gross profit = net sales – cost of goods sold
- Operating profit = gross profit – total operating expenses
- Net profit = operating profit – taxes – interest
- Net profit = net sales – cost of goods sold – operating expense – taxes – interest
See also
- Gross income
- Net profit
- Profitability index
- Rate of return
- Return on assets
- Return on equity
- Rate of profit
- Profit model
- Income statement
Footnotes
References
- Courbois, R.; Temple, P. (1975). La methode des "Comptes de surplus" et ses applications macroeconomiques. 160 des Collect,INSEE,Serie C (35). p. 100.
- Craig, C.; Harris, R. (1973). "Total Productivity Measurement at the Firm Level". Sloan Management Review (Spring 1973): 13–28.
- Genesca, G.E.; Grifell, T. E. (1992). "Profits and Total Factor Productivity: A Comparative Analysis". Omega. The International Journal of Management Science. 20 (5/6): 553–568. doi:10.1016/0305-0483(92)90002-O.
- Gollop, F.M. (1979). "Accounting for Intermediate Input: The Link Between Sectoral and Aggregate Measures of Productivity Growth". Measurement and Interpretation of Productivity. National Academy of Sciences.
- Hulten, C. R. (January 2000). "Total Factor Productivity: A Short Biography". NBER Working Paper No. 7471. doi:10.3386/w7471.
- Hulten, C. R. (September 2009). "Growth Accounting". NBER Working Paper No. 15341. doi:10.3386/w15341.
- Jorgenson, D.W.; Ho, M.S.; Samuels, J.D. (2014). Long-term Estimates of U.S. Productivity and Growth (PDF). Tokyo: Third World KLEMS Conference.
- Kurosawa, K (1975). "An aggregate index for the analysis of productivity". Omega. 3 (2): 157–168. doi:10.1016/0305-0483(75)90115-2.
- Loggerenberg van, B.; Cucchiaro, S. (1982). "Productivity Measurement and the Bottom Line". National Productivity Review. 1 (1): 87–99. doi:10.1002/npr.4040010111.
- Pineda, A. (1990). A Multiple Case Study Research to Determine and respond to Management Information Need Using Total-Factor Productivity Measurement (TFPM). Virginia Polytechnic Institute and State University.
- Riistama, K.; Jyrkkiö E. (1971). Operatiivinen laskentatoimi (Operative accounting). Weilin + Göös. p. 335.
- Saari, S. (2006a). Productivity. Theory and Measurement in Business. Productivity Handbook (In Finnish). MIDO OY. p. 272.
- Saari, S. (2011). Production and Productivity as Sources of Well-being. MIDO OY. p. 25.
- Saari, S. (2006). Productivity. Theory and Measurement in Business (PDF). Espoo, Finland: European Productivity Conference.
Further reading and external links
- Fuleky, P. (September 2006). "Anatomy of a Cobb-Douglas Type Production/Utility Function in Three Dimensions". University of Washington.
- Fuleky, P. (October 2006). "Anatomy of a Constant Elasticity of Substitution Type Production/Utility Function in Three Dimensions". University of Washington.
- Moroney, J. R. (1967) Cobb-Douglass production functions and returns to scale in US manufacturing industry, Western Economic Journal, vol 6, no 1, December 1967, pp 39–51.
- Pearl, D. and Enos, J. (1975) Engineering production functions and technological progress, The Journal of Industrial Economics, vol 24, September 1975, pp 55–72.
- Robinson, J. (1953) The production function and the theory of capital, Review of Economic Studies, vol XXI, 1953, pp. 81–106
- Anwar Shaikh, "Laws of Production and Laws of Algebra: The Humbug Production Function", in The Review of Economics and Statistics, Volume 56(1), February 1974, p. 115–120.
- Anwar Shaikh, "Laws of Production and Laws of Algebra—Humbug II", in Growth, Profits and Property ed. by Edward J. Nell. Cambridge, Cambridge University Press, 1980.
- Shaikh, Anwar (Summer 2005). "Nonlinear Dynamics and Pseudo-Production Functions" (PDF). Eastern Economic Journal. 31 (3) – via Holy Cross.
- Shephard, R (1970) Theory of cost and production functions, Princeton University Press, Princeton NJ.
- Thompson, A. (1981) Economics of the firm, Theory and practice, 3rd edition, Prentice Hall, Englewood Cliffs. ISBN 0-13-231423-1
- Elmer G. Wiens: Production Functions - Models of the Cobb-Douglas, C.E.S., Trans-Log, and Diewert Production Functions.
- Profit and Loss, Ludwig von Mises (1951)
- Measuring the Long-Run Profitability of the Firm, Salmi and Virtanen (1997)
This article includes a list of references related reading or external links but its sources remain unclear because it lacks inline citations Please help improve this article by introducing more precise citations May 2020 Learn how and when to remove this message Profit in accounting is an income distributed to the owner in a profitable market production process business Profit is a measure of profitability which is the owner s major interest in the income formation process of market production There are several profit measures in common use Stock index chart showing the recovery after the 2020 Stock Market Crash Income formation in market production is always a balance between income generation and income distribution The income generated is always distributed to the stakeholders of production as economic value within the review period The profit is the share of income formation the owner is able to keep to themselves in the income distribution process Profit is one of the major sources of economic well being because it means incomes and opportunities to develop production The words income profit and earnings are synonyms in this context Other termsNet sales gross sales customer discounts returns and allowances Gross profit net sales cost of goods sold Operating profit gross profit total operating expenses Net profit operating profit taxes interest Net profit net sales cost of goods sold operating expense taxes interestSee alsoGross income Net profit Profitability index Rate of return Return on assets Return on equity Rate of profit Profit model Income statementFootnotesReferencesCourbois R Temple P 1975 La methode des Comptes de surplus et ses applications macroeconomiques 160 des Collect INSEE Serie C 35 p 100 Craig C Harris R 1973 Total Productivity Measurement at the Firm Level Sloan Management Review Spring 1973 13 28 Genesca G E Grifell T E 1992 Profits and Total Factor Productivity A Comparative Analysis Omega The International Journal of Management Science 20 5 6 553 568 doi 10 1016 0305 0483 92 90002 O Gollop F M 1979 Accounting for Intermediate Input The Link Between Sectoral and Aggregate Measures of Productivity Growth Measurement and Interpretation of Productivity National Academy of Sciences Hulten C R January 2000 Total Factor Productivity A Short Biography NBER Working Paper No 7471 doi 10 3386 w7471 Hulten C R September 2009 Growth Accounting NBER Working Paper No 15341 doi 10 3386 w15341 Jorgenson D W Ho M S Samuels J D 2014 Long term Estimates of U S Productivity and Growth PDF Tokyo Third World KLEMS Conference Kurosawa K 1975 An aggregate index for the analysis of productivity Omega 3 2 157 168 doi 10 1016 0305 0483 75 90115 2 Loggerenberg van B Cucchiaro S 1982 Productivity Measurement and the Bottom Line National Productivity Review 1 1 87 99 doi 10 1002 npr 4040010111 Pineda A 1990 A Multiple Case Study Research to Determine and respond to Management Information Need Using Total Factor Productivity Measurement TFPM Virginia Polytechnic Institute and State University Riistama K Jyrkkio E 1971 Operatiivinen laskentatoimi Operative accounting Weilin Goos p 335 Saari S 2006a Productivity Theory and Measurement in Business Productivity Handbook In Finnish MIDO OY p 272 Saari S 2011 Production and Productivity as Sources of Well being MIDO OY p 25 Saari S 2006 Productivity Theory and Measurement in Business PDF Espoo Finland European Productivity Conference Further reading and external linksFuleky P September 2006 Anatomy of a Cobb Douglas Type Production Utility Function in Three Dimensions University of Washington Fuleky P October 2006 Anatomy of a Constant Elasticity of Substitution Type Production Utility Function in Three Dimensions University of Washington Moroney J R 1967 Cobb Douglass production functions and returns to scale in US manufacturing industry Western Economic Journal vol 6 no 1 December 1967 pp 39 51 Pearl D and Enos J 1975 Engineering production functions and technological progress The Journal of Industrial Economics vol 24 September 1975 pp 55 72 Robinson J 1953 The production function and the theory of capital Review of Economic Studies vol XXI 1953 pp 81 106 Anwar Shaikh Laws of Production and Laws of Algebra The Humbug Production Function in The Review of Economics and Statistics Volume 56 1 February 1974 p 115 120 Anwar Shaikh Laws of Production and Laws of Algebra Humbug II in Growth Profits and Property ed by Edward J Nell Cambridge Cambridge University Press 1980 Shaikh Anwar Summer 2005 Nonlinear Dynamics and Pseudo Production Functions PDF Eastern Economic Journal 31 3 via Holy Cross Shephard R 1970 Theory of cost and production functions Princeton University Press Princeton NJ Thompson A 1981 Economics of the firm Theory and practice 3rd edition Prentice Hall Englewood Cliffs ISBN 0 13 231423 1 Elmer G Wiens Production Functions Models of the Cobb Douglas C E S Trans Log and Diewert Production Functions Profit and Loss Ludwig von Mises 1951 Measuring the Long Run Profitability of the Firm Salmi and Virtanen 1997 Library resources about Profit accounting Resources in your library
