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Vic Bilson
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Vic Bilson   My Press Releases

Understanding Your Profit and Loss

Published on 7/13/2013
For additional information  Click Here

It might seem like a no-brainer to define what profit and loss are, but like everything else, these have definitions.  Profit might be called different things - it is 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 securities such 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 accounting to assess the profits and losses of a business. You have to know what created both and what the results of both sides of the business equation are. That determines 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 belongs to the owner. 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. 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.
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