Now work in EBITDA and realize that not even net profit is really net profit. Understanding EBITDA really was a big lightbulb for me.
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NotMyOldRedditName@lemmy.world 3 days agoThis 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.
Lightor@lemmy.world 3 days ago
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.