Profit (economics)

Profit called the (positive ) success of autonomous individual economic activity in its general use. The profit is the difference between income and expenses and can also act as net profit (profit in a given accounting period ) or as gains, that is, as earnings per power unit ( "border income " ) are expressed. Activities which " make a profit " is ( = " encash " ) may be referred to as a " lucrative ". The opposite is the loss.

  • 8.1 determination of income by the International Accounting Standards
  • 8.2 Imputed income of the internal accounting
  • 8.3 Economic profit of the shareholder value approach


The explanatory power of earnings as a key figure is rather low, as long as no reference is made ​​to other sizes, such as the amount of capital that was used to obtain the prize. The explanatory power is also diminished by the fact that the reported profit (formally in the law 20 HGB referred to as net income pursuant to § 275 Section 2 No. ) the result of the actual business reflects mostly not because legal requirements prevent this (see reserves, lower of silence reserves).

Profit is also known as a profit, often in the pejorative sense. In the ideological language of the German Democratic Republic designated profit, revenue surpluses in socialist enterprises, whereas in capitalist enterprises these are known as a profit and with the connotation " exploitative, greedy for money " were connected.

Gain in the internal accounting

In the cost and performance accounting profit is the difference between revenue and the benefits and costs:




Gain in the overall corporate viewing

In the overall corporate view, he is oriented to the commercial law and shows the overall result, and thus the success of the company: business success = income - expenses


The pursuit of profit ( working economic principle) is a constitutive feature of the operation in the market economy. The pursuit of profit motivated the entrepreneurs to identify the needs of potential customers and to meet and adapt to the changing market conditions in the competition. Not liberal economic systems ( command economy ) take the place of the profit motive, the principle of plan fulfillment (hence colloquially plan or command economy). Without profit motive is no coordination of individual economic plans on the market mechanism instead; coordination through a central plan is performed instead.

The profit is the part of the value, which accrues to the company as income or capital appreciation, the owners ( shareholders, shareholders, shareholders ).

Determination of net income (business )

The determination of the profit made ​​in the income statement, referred to as systems of accounting. Depending on the purpose and design of the income statement to the specific content of each income concept used converts. Conversely, the income concept is substantiated only by the discovery rules of the income statement and thus operationalized ( measurable ). Since the various systems of the income statement can lead to different results, the amount of profit is not as clearly measurable, as it seems. Rather, the income statement is to be counted among the most important and challenging areas of business administration.

As a general term for all different ( concrete ) profit terms, the concept of success is preferred in business administration.

Types of income statement is the period income statement, the income statement piece ( spreadsheet ), and the investment account. During the period income statement to determine the success of an economy period (eg, fiscal year) has the goal of profit contribution of a single product unit or an individual order is determined using the income statement piece. The investment account is similar to the extent that the income statement piece, as it (about a production plant ) over its entire useful life determines the profit contribution of a potential investment of time. The central problem of Comprehensive Income is the attribution of positive (income or revenue ) and negative ( costs or expenses) components of success on each observation period. For this purpose are economic success components, which actually refer to several periods, split by the so-called temporal Interdependenzschnitte and to make as each period attributable to ( periodization ). Since the investment analysis considers the entire ( multi-period ) useful life of an object, but this has not a Periodisierungsproblem, but the problem of attribution of success components to the observed investment object (so-called factual Interdependenzschnitte ).

Systems of Comprehensive Income

The various systems of the period income statement is of particular importance as companies period based on the outcome of their economic activities towards third parties (government, investors and other stakeholders ) to account have ( Financial Accounting ) or for internal purposes of corporate control ( controlling) the economics of diverse interdependent want to make activities of the company in a period transparent ( Management Accounting ).

Relatively unproblematic, the periodization is where a number of individual activities contribute to the profit for the period and the temporal extent of a single business process in relation to the length of the subscription period is short ( short-cycle varieties and series production ). But where a longer-term and project-based service provision prevails - for example, in engineering - the attribution of income and expenses for each period are often difficult.

Determination of net income ( Commercial Law )

Since the determination of net income in the External Accounting for the protection of creditors, for the information of shareholders, to determine a distributable net income as well as for the determination of tax bases can not be left to the discretion of the company, there are correspondingly detailed determination rules in German law, particularly in the Commercial Code and find in the tax laws.

The commercial law, profit and loss account in accordance with § 242 section 2 HGB, a comparison of the income and expenses of the fiscal year. Therefore, the terms income and expenses always refer to the statutory or profit or loss and may only be used in business jargon so.

Determination of net income (Tax)

The concept of taxable income is based in Germany at the backward-looking individual assessment based on the principle of nominal capital preservation. A gain in terms of the nominal capital maintenance is available, provided that the shareholders 'equity at period end shareholders' equity at the end of the previous period - increased by the value of withdrawals and reduced by the value of deposits - in excess.

Following determination of income types can be distinguished:

  • Balance sheet comparison according to § 4 para 1 German Income Tax Act ( incomplete balance sheet comparison ) and § 5 ITA (complete balance sheet comparison ).
  • Revenue income statement according to § 4 section 3 Income Tax (so-called " 4/3-Rechnung ").
  • Determination of net income by the average rates in accordance with § 13a para 3-6 Income Tax Act.
  • Determination of profits in companies with merchant ships in international traffic by the guided mode in tonnage under § 5a Income Tax Act.

If the tax authority is not possible a determination or calculation of the tax base, it has to estimate the tax bases under § 162 AO. The result of this estimation is then treated as a gain of profit computation types according to § § 4 to 5a Income Tax Act.

Determination of net income ( Other)

Determination of income by the International Accounting Standards

In international accounting with no legal status is given, but international accounting standards - dominated by Anglo-Saxon traditions - set by private associations (so-called " standard setter "). These standards become binding only by the requirement about the Securities and Exchange Commission and other institutions that compliance documents to be submitted annual financial statements with the applicable standards of an accounting firm is to certify.

In particular, since large companies its net income increasingly determined by international standards, in particular by the U.S. Generally Accepted Accounting Standards ( U.S. GAAP) or International Financial Reporting Standards (IFRS ), the corresponding Anglo-Saxon profit terms are also increasingly used. This is particularly the so-called EBIT ( earnings before interest and taxes, capital gains ) and EBITDA ( earnings before interest, taxes, depreciation, and amortization, gross cash flow). The profits determined in accordance with the Anglo-Saxon standards differ quite from the commercial law of profit, since these rules arise other traditions and circumstances.

Imputed income of the internal accounting

The Internal Accounting serves the internal management purposes and can be configured by the companies principle freely, although in fact have evolved certain standards here. The Internal Accounting spoken to avoid misunderstandings, not from profits but from the results of operations. Operating income is calculated as the difference between benefits and costs. Costs and benefits differ in the investigation and therefore possibly in the amount of the corresponding income and expenses of the same operation. If the expenses are not also costs, is spoken of neutral expense. Deviations of the cost of the expenses are referred to as imputed costs.

Economic profit of the shareholder value approach

The approach of shareholder value will achieve a capital market-oriented management of the company through an aligned on appropriate performance measures strategy. Therefore, the shareholder-value approach combines approaches of capital market theory, strategic planning and accounting. Since the gain of the external accounting ( all systems ) is distorted by external rules, he is regarded as insufficient suitable for control purposes. This also applies to the constituent on the net profit profitability ratios.

Therefore, the concept of discounted cash flow ( DCF) turns away from the period income statement and is based on cash flows ( cash flows ) and the method of dynamic investment calculation. Hereby it is possible to alternative strategies with respect to their appreciation potential for the owners (shareholders ) to quantify.

For a retrospective assessment of in a period corporate value and for the foundation of appropriate incentive systems, the DCF model is not suitable, however. The consulting company "Star and Stewart" has therefore developed an alternative approach, based on the data of the external accounting according to international standards, but they corrected for the operational management concerns. The so- corrected gain is as NOPAT ( Net operating profit after tax) respectively. An increase in value but alone is not connected according to this concept with a positive NOPAT, only when the cost of capital employed have been earned, wearing a beyond this net income (excess profit ) to increase the value of the company. This difference between the NOPAT and the cost of capital is referred to as " Economic profit " or as Economic Value Added ( EVA). EVA takes into account many of the corrections, which account for even the difference between the period of performance measures of the internal and external accounting; namely the extraction of non-operating, non-period and extraordinary expenses. Addition, however, are also investments in intangible assets ( education, research and development, market development ) as such (and not as an expense of the pay period ) treated. Since EVA but especially takes into account a kaptialmarkttheoretisch justified cost of capital, a significant capital market orientation is achieved with this concept, as defined by the traditional concepts of the internal accounting system ( imputed interest, risk costs) can not be made.

Formulas for the calculation of profits

Profit = Net Profit ( contrast: Gross profit = gross margin)

  • Profit = Revenue - Cost = G = E - K where K = Variable costs Fixed costs
  • Profit = Contribution Margin - Fixed Costs

See: profit maximization, formulary Business Administration

Income in the economy