tutor2u GCSE Business Studies What is profit? Profit is the difference between the income of the business and all its costs/expenses. It is normally measured over a period of time. They are four main types of profit quoted by a business: fGross profit This is the difference between sales income and the direct costs of making those products. Gross profit is used as a performance indicator to help the business make decisions over its pricing policies and use of materials. fNet profit Net profit represents gross profit less all expenses associated with the normal running of the business. Net profit shows how well the business performs under its normal trading circumstances. It is used to calculate the “primary efficiency” ratio. fNet profit after interest and taxation This is the profit available for the shareholders. Net profit after interest and taxation is all due to the owners of the business. They can choose to take out, in the form of dividends, all, some or none of this.
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