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Profit Income (What It Means And What You Should Know: Overview)

Looking for Profit Income?

How do you define profit income?

What are the essential elements you should know!

Keep reading as we have gathered exactly the information that you need!

Let’s dig into our money and income knowledge!

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What Is Profit Income

Profit income is sometimes loosely used to refer to the amount of money a company or person may have generated in profits from their income.

Keep in mind that there are many terms that are used on a day-to-day basis by business people or individuals where their official meaning may not be the same.

An accountant or finance expert would refer to profit income as net profit or net income.

As a result, “profit income” is a term loosely used to refer to how much a company may have generated in profits.

Let’s decompose the phrase profit income to better understand it and then see how it differs from net income.

Profit 

What is profit?

We typically use the term “profit” to refer to revenues that exceed the overall expenses.

You could have different types of profit figures such as gross profit, operating profit, or other.

Businesses make decisions based primarily on the profitability of a project either top-line profits, bottom-line profits, or any other number relevant to the business.

Income 

What is income now you say?

Income generally refers to how much money was received for work, services, sale of products, or any other sources.

You can have different types of income as well:

  • Active income
  • Passive income
  • Portfolio income

You earn active income when you actively participate in generating the income like an employee earning a salary.

You earn passive income when there is an income-producing asset that provides you with an income like rental revenue and where you do not actively participate in generating the income.

You earn portfolio income through investments like dividend income, interest income, and capital gains.

Income can also be used to refer to a specific type of income calculation such as operating income, top-line income, net income, or other.

The calculation of income is a measure of a company’s profitability and ability to generate revenues.

Net Income 

Net income is the result of a specific calculation performed by a company in order to find how much money was leftover during a given period.

In a company’s income statement, you start with your total revenues coming from all sources and then you deduct various expenses such as operating expenses and cost of goods sold.

Then you deduct non-cash expenses such as depreciation and amortization.

Finally, you deduct taxes.

What you are left, in the end, is the net income as reported on the income statement.

Net income can also be called net profits, net earnings, or even the bottom line.

“Profit Income” Takeaways 

So what is Profit Income?

The term “profit” and “income” do not necessarily mean the same thing.

However, you may find some people use the term profit income loosely speaking.

The idea that you try to convey by saying “profit income” is the amount of money that you generated in profits from your income.

Income refers to the revenue you earn whereas profit refers to your revenues less certain expenses.

Let’s look at a summary of our findings.

Define Profit Income

  • From a finance and accounting perspective, profit income is not a formal phrase used by experts
  • However, you may hear business people use the term in their day-to-day lives to generally refer to how much profit they expect to receive from a given type of income
  • Profit is a term used to refer to how much money you earned in excess of your expenses (you can calculate different types of profits such as gross profit, net profit, operational profit, or other)
  • Income is a term used to refer to a type of income (active, passive, portfolio) or a type of income calculation (operating income, net income, gross income, or other)
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