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gsenviro eNotes educator| Certified Educator

In simplest terms, profit is the difference between the cost of a commodity and the price at which it sells. In other words, it is the difference between the amount invested in a commodity and the returns or revenues earned on the commodity. For example, if a vendor buys a laptop for $1000 and sells it to a customer for $1200, then the difference (= $1200 - $1000) = $ 200 is his profit. Note that profit and net profit (As reported by businesses) are different from each other. Companies have to pay taxes on the profit they earn and this tax amount is deducted from the profit and this difference is termed net profit. Also note that companies also include all the costs incurred for the commodity (such as operating expense, transportation and storage, advertisement cost, etc.).

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