Net profit excludes the costs of interest and taxes paid by the company. It is sometimes referred to as the firm’s “bottom line” because it is at the bottom of the income statement. Net profit is calculated by deducting interest
A company’s gross profit is its financial gain after deducting the costs of manufacturing and distributing its goods or services. These expenses are called the cost of goods sold. The amount of money actually earned is referred to as the
Variable costs are the expenses incurred by a business in proportion to its output or revenue. The broad definition of variable costs includes any costs that vary depending on how much product a company produces or revenue it generates in
The basic definition of revenue is the total amount of money brought in by a company’s operations over a specified time period. The revenue of a company is its gross income before deducting any expenses. Revenue is defined by profits
Liabilities are monetary obligations that a company may have that are payable to a third party. Employee wages and benefits, taxes, insurance, accounts payable, and any expenses incurred during normal operation are all examples of liabilities. To define liabilities, a
A fiscal year is a company’s accounting period. The company determines the start and end dates of its fiscal year; some coincide with the calendar year, while others vary based on when accountants can prepare financial statements. The tax laws
Fixed costs are costs that a company incurs on a consistent basis regardless of production quantity or revenue. Any costs that are consistent with a company’s normal operations are included in the general fixed cost definition. These include any regularly
Expenses are any purchases or money spent in order to generate revenue. Expenses are also known as “the cost of doing business.” Although some expenses fall into more than one category, there are four main types of expenses. Fixed expenses
Equity, also known as net assets, is a finance term that refers to the amount of money that a company’s owners have invested in it. Also referred to as “owner’s equity” and can include non-monetary assets such as time, energy,
Depreciation is a method of accounting for measuring and distributing the cost of an asset over its useful life. Depreciation refers to the loss of an asset’s value as it ages and can only be applied to tangible assets that