All companies have to earn a profit, not just to pay for the expense of the goods plus all of the overhead, but also to be able to reinvest and grow. There’s a difference between earning a livable wage while the company as a whole remains poor and earning barely enough to live on while the investors pull in massive gains year over year.
Comment on Amazon Artificially Discounting Items $0.01 Below the Free Shipping Limit
Takumidesh@lemmy.world 4 days agoI mean, non profits exist. Of course it’s not the case for Amazon, but you don’t need to profit in order to exist as a company, and people still get to make money.
tpihkal@lemmy.dbzer0.com 4 days ago
Takumidesh@lemmy.world 3 days ago
A company taking excess revenue and reinvesting it isn’t profit.
There may be phrases with the word profit in them that include that value, but the general accepted definition is profit is the money that gets distributed to the stakeholders after expenses are covered. This is things like dividends for publicly traded companies, or for private companies, it’s just straight up paying out the cash to stakeholders.
NotMyOldRedditName@lemmy.world 4 days ago
Non profit doesn’t mean no profit.
Non profits make enough profit to pay their employees, or they get money from other sources. They still make money.
For a company to succeed, there must be profit, or have an outside source of funding.
You cannot pay rent with revenue and no profit.
Takumidesh@lemmy.world 4 days ago
Non profit means no profit. Salaries, rent, etc are not profit.
That is fundamentally what profit is, revenue less expenses.
NotMyOldRedditName@lemmy.world 4 days ago
This is why you’re wrong
Profit is revenue minus cost of goods
NET profit or net income is after expenses unrelated to cost of goods.
Takumidesh@lemmy.world 3 days ago
So a service company that only pays salaries has 100% profit?
This is splitting hairs and if all the people arguing about this took an actual class in uni a out this they would know that.
Gross profit typically includes cost of goods sold, COGS doesn’t have an explicit legal definition, it’s up to the business to decide what they include, they can include employee salaries or not, this is called abortion costing, a business which puts salaries, rent utilities, etc, under abortion cost would have a gross profit equal to their net profit.
When dealing with accounting, you can call things whatever you want, net profit isn’t something that has a legal definition.
For example, I just decided that my business doesn’t follow your definition of profit, and instead defines profit as only money I find in my pockets. There isn’t a legal definition of how I need to define profit, so it’s just as valid as all the other definitions.
And regardless of all that, I don’t understand how anything you said proves me wrong. Profit is net profit, just the same as profit is gross profit, you can put an arbitrary boundary at any point in a financial metric and it makes sense to do so, but it doesn’t change what the word profit means. But the claims that ‘if you don’t profit you have to go in debt’ is just silly and only makes since if you cherry pick a very narrow definition of profit that is used as one part of a general financial metric for a business.
A company that has revenue - all expenses = 0 does not need to be in debt, this is also how a non profit will look, 1 million in revenue, 500k in general expenses, 500k reinvestment into the company final result 0 dollars left over. The effective meaning and understanding of profit for practical purposes and lay people (not book keepers within a company that needs more refined and specific metrics) is the amount of money that gets distributed to stakeholders after a company has covered its expenses.
Your block about non profits is exactly my point. A non profit does not pay out the left over money to stakeholders but people who work for a non profit still make money.
Lightor@lemmy.world 4 days ago
Now work in EBITDA and realize that not even net profit is really net profit. Understanding EBITDA really was a big lightbulb for me.
ricecake@sh.itjust.works 4 days ago
Heh, “revenue is not profit”.
Non-profits are specifically not allowed to have revenue in excess of expenses. If they take in too much money, the excess has to be put back in for operational expenses in the future, an endowment or something like that.
Crassus@feddit.nl 4 days ago
(In the Netherlands) Non profits are allowed to make profit, they just need to pay tax above a certain amount of net profit. The thing that makes them “non-profit” is that they are prohibited to pay out that profit. Hence there is no incentive for (excessive) profit.
NotMyOldRedditName@lemmy.world 4 days ago
It’s like that pretty much everywhere. people just don’t understand.
NotMyOldRedditName@lemmy.world 4 days ago
Yes, nonprofits in the United States can earn a profit, but they must reinvest it back into the organization. Nonprofits are tax-exempt and are formed to serve the public, so they can’t distribute profits to individuals. How nonprofits make money
Donations and fundraising: Nonprofits raise money through donations and fundraising eventsEarned income: Nonprofits generate income through activities related to their mission, such as:
Selling merchandiseCharging fees for services Renting out space Selling food
How nonprofits use their profits
Restrictions on nonprofit profits
ricecake@sh.itjust.works 4 days ago
Copying a bunch of unsourced text at someone without context is a great way to get them to not bother reading it. Why don’t you type the point you were hoping to make?