Profit

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Profit is the excess of total revenue over total cost for a business. Alternatively, it is the return to anyone or anything that engages in an entrepreneurial activity.

Profits of 500 largest American corporations, 1935-2009

There are different forms of profit in economics:

  • Economic Profit - achieved when the Total Cost (TC) subtracted from Total Revenue (TR) yields a positive gain.
  • Normal Profit - a firm is making normal profit when it makes enough revenue to just cover its day-to-day operating costs. Therefore, it is sometimes viewed as a cost.

Short-term profit

  • There is nothing easier to do than boost profits in the short term. All a manager has to do is cut any expense related to the long term: training, maintenance, purchase of new capital, etc. [1]
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