Profit

Definition

Profit, in a business context, is the financial gain or positive difference between total revenue and total expenses over a specific period of time.

What is profit?

Profit is a fundamental measure of a business’s financial performance and is a key indicator of its viability and success.

Formula for calculating profit:

Profit = total revenue – total expenses

Types of profit:

  1. Gross profit: This is the profit calculated before accounting for operating expenses. It reflects the profitability of the core business operations.
  2. Operating profit (operating income): This is the profit derived after accounting for operating expenses. It provides an indication of the profitability of the company’s core operations.
  3. Net profit (net income): This is the final profit figure after all expenses, including taxes and interest, have been subtracted from total revenue. It represents the overall profitability of the business.

Profitability is a primary measure of a business’s success. It indicates whether a company is generating sufficient income to cover costs and generate a return on investment. Profit allows a business to provide returns to its shareholders through dividends, reinvestment, or share buybacks and will attract investors and lenders 

Example of profit

A bakery sells cupcakes for R3 each. The cost to make each cupcake, including ingredients and labor, is R1. After selling 100 cupcakes, the bakery’s total revenue is R300 (R3 x 100) and the total cost to make the cupcakes is R100 (R1 x 100).

Therefore, the bakery’s profit is R200.

Ready to grow your business?

Clever finance tips and the latest news

Delivered to your inbox monthly

Join the 95,000+ businesses just like yours getting the Swoop newsletter.

Free. No spam. Opt out whenever you like.

Our offices:

Disclaimer: Swoop Finance helps South African firms access business finance, working directly with businesses and their trusted advisors. We are a credit broker and do not provide loans or other finance products ourselves. We can introduce you to a panel of lenders, equity funds and grant agencies. Whichever lender you choose we may receive commission from them (either a fixed fee of fixed % of the amount you receive) and different lenders pay different rates. For certain lenders, we do have influence over the interest rate, and this can impact the amount you pay under the agreement. All finance and quotes are subject to status and income. Applicants must be aged 18 and over and terms and conditions apply. Guarantees and Indemnities may be required. Swoop Finance can introduce applicants to a number of providers based on the applicants’ circumstances and creditworthiness. Swoop Finance (Pty) Ltd is registered with CIPC in South Africa (company number 2023/820661/07, registered address 21 Dreyer Street, Cape Town, South Africa, 7708).

© Swoop 2025

Looks like you're in . Go to our site to find relevant products for your country. Go to Swoop