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what is profit
profit describes the financial benefit realized when revenue generated from a business activity exceeds the expenses costs and taxes involved in sustaining the activity in question any profits earned funnel back to business owners who choose to either pocket the cash distribute it to shareholders as dividends or reinve...
what does profit tell you
profit is the money a business pulls in after accounting for all expenses whether it s a lemonade stand or a publicly traded multinational company the primary goal of any business is to earn money therefore a business performance is based on profitability in its various forms some analysts are interested in top line pr...
where does profit come from
in a capitalist system where firms compete with one another to sell their goods the question of where profits come from has been one of interest among economists karl marx for instance argued that profits arise from surplus labor extracted from workers by business owners modern thinkers suggest that profits compensate ...
what is the corporate tax rate on profits
in the u s the corporate tax rate on profits is currently 21 reduced from 35 since the 2017 tax cuts and jobs act 2
what does a company s bottom line tell you
the bottom line tells a company how profitable it was during a period and how much it has available for dividends and retained earnings what s retained can be used to pay off debts fund projects or reinvest in the company an increasing bottom line is a sign that a company is growing while a shrinking bottom line could ...
what is a profit and loss p l statement
a profit and loss p l statement also known as an income statement is a financial statement that summarizes the revenues costs expenses and profits losses of a company during a specified period these records provide information about a company s ability to generate revenues manage costs and make profits
how profit and loss p l statements work
the p l statement is one of three financial statements that every public company issues on a quarterly and annual basis along with the balance sheet and the cash flow statement it is often the most popular and common financial statement in a business plan as it shows how much profit or loss was generated by a business ...
why are profit and loss p l statements important
a profit and loss p l statement is one of the three types of financial statements prepared by companies the other two are the balance sheet and the cash flow statement the purpose of the p l statement is to show a company s revenues and expenditures over a specified period of time usually over one fiscal year investors...
what is the difference between a p l statement and a balance sheet
a company s p l statement shows its income expenditures and profitability over a period of time the balance sheet on the other hand provides a snapshot of its assets and liabilities on a certain date the balance sheet is typically presented as of the last day of the company s fiscal year investors use the balance sheet...
are all companies required to prepare p l statements
publicly traded companies are required to prepare p l statements and must file their financial statements with the u s securities and exchange commission sec so that they can be scrutinized by investors analysts and regulators companies must comply with a set of rules and guidelines known as generally accepted accounti...
what is profit before tax pbt
profit before tax is a measure that looks at a company s profits before the company has to pay corporate income tax it essentially is all of a company s profits without the consideration of any taxes profit before tax can be found on the income statement as operating profit minus interest profit before tax is the value...
why is profit before tax important
profit before tax may also be referred to as earnings before tax ebt or pre tax profit the measure shows all of a company s profits before tax a run through of the income statement shows the different kinds of expenses a company must pay leading up to the operating profit calculation for example gross profit deducts co...
how is profit before tax calculated
understanding the income statement can help an analyst to have a better understanding of pbt its calculation and its uses the third section of the income statement focuses in on interest and tax these deductions are taken from the summation of the second section which results in operating profit ebit interest is an imp...
why is profit before tax useful
pbt is not typically a key performance indicator on the income statement these are usually focused on gross profit operating profit and net profit however like interest the isolation of a company s tax payments can be an interesting and important metric for cost efficiency management the pre tax profit also determines ...
what is the difference between ebit ebt and ebitda
working down the income statement provides a view of profitability with different types of expenses involved operating profit also known as ebit is a measure of a company s full operational capabilities this includes the direct cogs involved with manufacturing a product and the indirect operating expenses that are asso...
is ebt the same as profit before tax
earnings before tax ebt is often referred to as profit before tax as well as pre tax income
what is the difference between profit before tax and taxable income
profit before tax is a company s profits before considering tax obligations it is found on the income statement as operating profit less interest on the other hand taxable income is the amount of income that is subject to taxes depending on the tax laws in a company s jurisdiction
what is the difference between profit before taxes and ebitda
while profit before tax shows a company s profits before taking into account its tax costs earnings before interest tax depreciation and amortization ebitda includes non cash activities like depreciation and amortization in this way ebitda is used as a measure for profitability but critics have said that it is less ref...
what is a profit center
a profit center is a branch or division of a company that directly adds or is expected to add to the entire organization s bottom line it is treated as a separate standalone business responsible for generating its revenues and earnings its profits and losses are calculated separately from other areas of the business pe...
what is profit margin
profit margin is a common measure of the degree to which a company or a particular business activity makes money expressed as a percentage it represents the portion of a company s sales revenue that it gets to keep as a profit after subtracting all of its costs for example if a company reports that it achieved a 35 pro...
how profit margin works
businesses and individuals around the globe perform economic activities with the aim of making a profit numbers like x million in gross sales or y million in earnings are useful but don t address a business s profitability and comparative performance several different quantitative measures are used to compute the gains...
when comparing similar companies be wary of unusually high profit margins a closer investigation of the financials may reveal that the current margin was inflated by a one off event and isn t sustainable
examples of low profit margin industriesoperation intensive businesses like transportation that may have to deal with fluctuating fuel prices drivers perks and retention and vehicle maintenance usually have lower profit margins agriculture based ventures often also fall into this category owing to weather uncertainty h...
how do you define profit margin
profit margin is a measure of how much money a company is making on its products or services after subtracting all of the direct and indirect costs involved it is expressed as a percentage
what are the different types of profit margins
there are four ways of looking at a company s profit margin gross profit margin operating profit margin pretax profit margin and net profit margin
what is the difference between gross profit and net profit
gross profit measures a company s total sales revenue minus the total cost of goods sold or services performed net profit margin also subtracts other expenses including overhead debt repayment and taxes net profit is considered a company s bottom line the bottom linethere are many different metrics that analysts and in...
what is a profit sharing plan
a profit sharing plan gives employees a share in the profits of a company under this type of retirement plan also known as a deferred profit sharing plan dpsp an employee receives a percentage of a company s profits based on its quarterly or annual earnings it s up to the company to decide how much of its profits it wi...
is a profit sharing plan the same as a 401 k
no a profit sharing plan is not the same thing as a 401 k with a profit sharing plan a company gives employees a portion of the profit based on quarterly or annual earnings with a 401 k employees are making personal contributions in some cases a company will partially match an employee s 401 k contribution
is profit sharing taxed like a bonus
no profit sharing is not taxed like a bonus with a cash plan employees are given either cash or stock on a regular basis such as quarterly or annually the payouts are quick relative to a retirement plan but they are also taxed as regular income a deferred plan sees profits set aside for a later date usually when the em...
what is a typical profit sharing amount
employers typically use one of two methods to determine contribution amounts with a comp to comp method the total amount of compensation given to all employees is calculated next each employee s compensation is divided by the total compensation yielding a percentage that establishes each employee s portion of the profi...
is profit sharing worth it
it depends on what your priorities are a profit sharing plan is a great way for a business to give its employees a sense of ownership in the company but there are typically restrictions as to when and how an employee can withdraw these funds without penalties the bottom linea profit sharing plan is a way for employers ...
what is a profit sharing plan
a profit sharing plan gives employees a share in the profits of a company under this type of retirement plan also known as a deferred profit sharing plan dpsp an employee receives a percentage of a company s profits based on its quarterly or annual earnings it s up to the company to decide how much of its profits it wi...
is a profit sharing plan the same as a 401 k
no a profit sharing plan is not the same thing as a 401 k with a profit sharing plan a company gives employees a portion of the profit based on quarterly or annual earnings with a 401 k employees are making personal contributions in some cases a company will partially match an employee s 401 k contribution
is profit sharing taxed like a bonus
no profit sharing is not taxed like a bonus with a cash plan employees are given either cash or stock on a regular basis such as quarterly or annually the payouts are quick relative to a retirement plan but they are also taxed as regular income a deferred plan sees profits set aside for a later date usually when the em...
what is a typical profit sharing amount
employers typically use one of two methods to determine contribution amounts with a comp to comp method the total amount of compensation given to all employees is calculated next each employee s compensation is divided by the total compensation yielding a percentage that establishes each employee s portion of the profi...
is profit sharing worth it
it depends on what your priorities are a profit sharing plan is a great way for a business to give its employees a sense of ownership in the company but there are typically restrictions as to when and how an employee can withdraw these funds without penalties the bottom linea profit sharing plan is a way for employers ...
the profitability index pi alternatively referred to as value investment ratio vir or profit investment ratio pir describes an index that represents the relationship between the costs and benefits of a proposed project
the profitability index is calculated as the ratio between the present value of future expected cash flows and the initial amount invested in the project a higher pi means that a project will be considered more attractive investopedia theresa chiechiunderstanding the profitability index pi the profitability index is he...
when using the profitability index to compare the desirability of projects it s essential to consider how the technique disregards project size therefore projects with larger cash inflows may result in lower profitability index calculations because their profit margins are not as high
the pi or the profitability index measures the costs and benefits of a proposed project it is calculated as the present value of the expected cash flows divided by the cost of the initial investment formula for the profitability indexthe profitability index can be computed using the following ratio the present value of...
when using the profitability index exclusively calculations greater than 1 0 are ranked based on the highest calculation when limited capital is available and projects are mutually exclusive the project with the highest profitability index is to be accepted as it indicates the project with the most productive use of li...
the profitability index is also called the benefit cost ratio for this reason although some projects result in higher net present values those projects may be passed over because they do not have the highest profitability index and do not represent the most beneficial usage of company assets example of the profitabilit...
where pv is the present value cf is the cash flow in a given year r is the discount rate and n is the number of years
plugging in the values for this example we get the profitability index for the factory expansion project is then calculated as to calculate the profitability index for the new factory project the present value of the future cash flows would be calculated using the same formula the profitability index for the new factor...
does not consider ongoing future costs
ignores project sizebad forecasts or assumptions can make the analysis unreliablehere are some advantages of the profitability index here are some disadvantages of the profitability index
how is the profitability index computed
the profitability index is a calculation determined by dividing the present value of futures cash flows by the initial investment in the project the present value of the future cash flows is calculated using the time value of money which takes into account the fact that money today is worth more than the same amount of...
what is the profitability index used for
the profitability index is used for comparison and contrast when a company has several investments and projects it is considering undertaking the pi is especially useful when a company has limited resources and can t pursue all potential projects as it can be used to prioritize which projects to pursue first the index ...
what is a good profitability index
generally the higher the pi the better a profitability index greater than 1 0 is often considered to be a good investment as it means that the expected return is higher than the initial investment when making comparisons the project with the highest pi may be the best option
what are other names for the profitability index
the profitability index is also called the profit investment ratio pir cost benefit ratio or the value investment ratio vir the bottom linethe profitability index pi is a measure of the attractiveness of a project or investment it is calculated by dividing the present value of future expected cash flows by the initial ...
what are profitability ratios
profitability ratios are a class of financial metrics that are used to assess a business s ability to generate earnings relative to its revenue operating costs balance sheet assets or shareholders equity over time using data from a specific point in time they are among the most popular metrics used in financial analysi...
what can profitability ratios tell you
profitability ratios can shed light on how well a company s management is operating a business investors can use them along with other research to determine whether or not a company might be a good investment broadly speaking higher profitability ratios can point to strengths and advantages that a company has such as t...
what are the most important profitability ratios
the profitability ratios often considered most important for a business are gross margin operating margin and net profit margin
why are profitability ratios significant
they re significant because they can indicate the ability to make regular profits after accounting for costs and how well a company manages investments for a return for shareholders they can reflect management s ability to achieve these two goals as well as the company s overall financial well being
how is business profitability best measured
the gross profit margin operating profit and net profit margin ratios are the most commonly used measurements of business profitability net profit margin reflects the amount of profit a business gets from its total revenue after all expenses are accounted for operating profit reflects the profit from the company s core...
what is a program evaluation review technique pert chart
a program evaluation review technique pert chart is a graphical representation of a project s timeline that displays all of the individual tasks necessary to complete the project put simply a pert chart is a project management tool that allows users to map out a project s timeline and itemize individual tasks this mean...
how program evaluation review technique pert charts work
a pert chart uses circles or rectangles called nodes to represent project events or milestones a chart can be made using different types of software this includes specialized computer software designed to create pert charts or even a simple program like microsoft excel 2the nodes on the pert chart are linked by vectors...
how to interpret a pert chart
a pert chart is a visual representation of a series of events that must occur within the scope of a project s lifetime the direction of the arrows indicates the flow and sequence of events required dotted activity lines represent dummy activities these are items that are located on another pert path numbers and time al...
what are the main components of a pert chart
a pert chart displays all of the key deliverables necessary to complete a project it indicates the amount of time and resources needed to perform each task and the person or department responsible for each the key deliverables or tasks are displayed with arrows that indicate the order in which each must be completed an...
how can i create a pert chart
microsoft excel can be used to create a pert chart custom software with ready made templates such as lucidchart also are available
why would i use a pert chart instead of a gantt chart
a pert chart requires a project manager to think through three possible timelines optimistic time is the shortest possible route to completion pessimistic time is the longest it might take if everything goes wrong the most likely time is a reasonable estimate of the best case scenario from the outset the project manage...
what are progress billings
progress billings are invoices requesting payment for work completed to date progress billings are prepared and submitted for payment at different stages in the process of a major project this type of billing is common in projects that last a long time it allows the person billing usually a contractor to fund the proje...
what s included in progress billings
the information included in progress billings is different from the typical invoicing practices of many companies some of the financial details might include progress billings include a technique called the schedule of values which outlines the different costs or values for each of the project s tasks a schedule of val...
what is a progressive tax
a progressive tax involves a tax rate that increases or progresses as taxable income increases it imposes a lower tax rate on low income earners and a higher rate on those with higher incomes this is usually achieved by creating tax brackets that group taxpayers by income range the income tax system in the u s is consi...
how progressive a tax structure is depends upon how much of the tax burden is transferred to higher incomes a tax code with tax rates ranging from 10 to 80 would be more progressive than one with rates ranging from 10 to 30
advantages of a progressive taxa progressive tax system reduces the tax burden on those who can least afford to pay they only have to pay 12 of their top dollars of income if they re single and earn less than 47 150 a year as of 2024 a single filer who earns more than 609 350 annually must pay 37 on their top dollars o...
do i pay the same percentage of tax on all my income
no you only pay your highest percentage tax rate on the portion of your income that exceeds the minimum threshold for that tax bracket a single person who earns 100 000 would fall into the 22 tax bracket but only on the portion of their income that exceeds 47 150 their income from 11 600 up to 47 150 would be taxed at ...
how often do the tax brackets change
tax brackets are set by congress and enforced by the internal revenue service irs changes are typically made based on legislation like the tax cuts and jobs act tcja of 2017 the tcja kept seven tax brackets but it increased the income ranges for many of them so some individuals could earn more before moving into a high...
what is the purpose of a progressive tax
progressive taxes exist so the burden of paying for government services oversight and infrastructure doesn t fall disproportionately on those earning lesser incomes those who earn less are taxed at a lesser rate those who earn more are taxed at a higher rate this concept is known as ability to pay taxation the top earn...
what is project finance
project finance is the funding of long term infrastructure industrial projects and public services using a nonrecourse or limited recourse financial structure the debt and equity used to finance the project are paid back from the cash flow generated by the project project financing is a loan structure that relies prima...
how project finance works
as noted above the term project finance refers to the financing of long term industrial and or infrastructure projects most commonly for oil and gas companies and the power sector it is also used to finance certain economic bodies like special purpose vehicles spvs the funding required for these projects is based entir...
when a company defaults on a loan recourse financing gives lenders full claim to shareholders assets or cash flow in contrast project financing designates the project company as a limited liability spv the lenders recourse is thus limited primarily or entirely to the project s assets including completion and performanc...
a key issue in nonrecourse financing is whether circumstances may arise in which the lenders have recourse to some or all of the shareholders assets a deliberate breach on the part of the shareholders may give the lender recourse to assets applicable law may restrict the extent to which shareholder liability may be lim...
what is the role of project finance
project finance is a way for companies to raise money to realize opportunities for growth this type of funding is generally meant for large long term projects it relies on the project s cash flows to repay sponsors or investors
what are the risks associated with project finance
some of the risks associated with project finance include volume financial and operational risk volume risk can be attributed to supply or consumption changes competition or changes in output prices inflation foreign exchange and interest rates often lead to financial risk operational risk is often defined by a company...
why do firms use project finance
project finance is a way for companies to fund long term projects this form of financing uses a nonrecourse or limited recourse financial structure firms with weak balance sheets are more apt to use project finance to meet their funding needs rather than trying to raise capital on their own this is especially true for ...
what is project management
project management is the planning and organization of a company s resources to move a specific task event or duty toward completion it can involve a one time project or an ongoing activity and resources managed include personnel finances technology and intellectual property understanding project managementgenerally sp...
when a large it company acquires smaller companies a key part of the project manager s job is to integrate project team members from various backgrounds and instill a sense of group purpose about meeting the end goal project managers may have some technical know how but also have the important task of taking high level...
project management toolsto held with organizing and staying on top of tasks the industry of project management usually leverages a handful of tools these tools have been touched on throughout this article but we ll call them out more specifically now note that projects that differ in size or scope may call for addition...
what is project management
project management is the planning execution and monitoring of a series of tasks that have an end goal companies embark on project management to achieve a certain process making sure the proper steps are taken at the right time this may relate to the company s operations i e moving from one office building to another o...
why is project management important
project management ensures that large deliverables are executed properly instead of focusing on one large end product project management usually documents evaluates and monitors a series of smaller more manageable tasks that come together to make something bigger possible project management is important because it ensu...
what are examples of project types
a common example of a project would be product development multiple departments are involved in creating the product marketing it selling it and more the team that designs a project is different from the teams that manufacture market or sell the product as part of a project each of these teams would be working with a p...
what makes a good project plan
communication is key to a good project plan each team s responsibilities should be detailed with a goal a time frame and resources available for example visual explanations such as gantt charts also are helpful these are bar graphs that can show each stage of a project and for example the time when that stage will take...
what is a projected benefit obligation pbo
a projected benefit obligation pbo is an actuarial measurement of what a company will need at the present time to cover future pension liabilities this measurement is used to determine how much must be paid into a defined benefit pension plan to satisfy all pension entitlements that have been earned by employees up to ...
how a projected benefit obligation pbo works
companies can provide employees with a number of benefits including a salary when they retire from work the financial accounting standards board s fasb statement of financial accounting standards no 87 states that companies must measure and disclose their pension obligations together with the performance of their plans...
what is promissory estoppel
promissory estoppel is the legal principle that a promise is enforceable by law even if made without formal consideration when a promisor has made a promise to a promisee who then relies on that promise to his subsequent detriment promissory estoppel is intended to stop the promisor from arguing that an underlying prom...
what is the difference between a contract and promissory estoppel
in contract law the doctrine of consideration states that there must be an exchange of consideration in order for a contract to be enforced if one party fails to uphold their end of a contract the other party can withdraw from that contract promissory estoppel is the exception to this rule under the doctrine of promiss...
what is equitable estoppel
equitable estoppel is a legal doctrine that prevents a party from taking a position that is contrary to their previous position if doing so harms the other party this rule prevents someone from going back on their word in a court of law
what damages can be recovered in promissory estoppel
the rules for promissory estoppel vary by jurisdiction generally speaking a successful case of promissory estoppel may result in the award of either reliance damages or expectation damages reliance damages are based on what it would cost to restore the promisee to their economic position before they relied on the broke...
what is a promissory note
a promissory note is a written promise by one party the note s issuer or maker to pay another party the note s payee a definite sum of money either on demand or at a specified future date a promissory note typically contains all the terms involved such as the principal debt amount interest rate maturity date payment sc...
how promissory notes work
promissory notes can lie between an iou s informality and a loan contract s rigidity an iou merely acknowledges a debt and the amount one party owes another a promissory note includes a promise to pay on demand or at a specified future date in addition to steps required for repayment like the repayment schedule althoug...
what s included in a promissory note
a promissory note should include all the details about a loan and the repayment terms in addition to the names of the borrower and the lender a promissory note may also include 3types of promissory notesin the united states promissory notes are often used when getting a student loan mortgage or a loan from a friend or ...
what does a promissory note contain
a form of debt instrument a promissory note represents a written promise on the part of the issuer to pay back another party a promissory note will include the agreed upon terms between the two parties such as the maturity date principal interest and issuer s signature essentially a promissory note allows entities othe...
what is an example of a promissory note
one example of a promissory note is a corporate credit promissory note for this type of promissory note a company will typically be seeking a short term loan in the case of a growing startup that is low on cash as it expands its operations the terms of the agreement could state that the company pays back the loan once ...
what are the pros and cons of a promissory note
a promissory note can be advantageous when an entity is unable to secure a loan from a traditional lender such as a bank however promissory notes can be risky as the lender may not have the same means and scale of resources as traditional financial institutions at the same time legal issues could arise for both the iss...
what is a promoter
a stock promoter is an individual or organization that helps raise money for some investment activity stock promoters may raise money for a company by offering investment vehicles other than traditional stocks and bonds such as limited partnerships and direct investment activities often promoters are paid in company st...
how a promoter works
investment promoters bring information about a specified investment to the attention of potential investors they may target domestic or foreign investors depending on the investment in question the goal is to locate capital that may have otherwise been invested elsewhere based on the limited knowledge available about t...
what is a promotion
promotion refers to a variety of actions intended to raise greater awareness or advancement of an item in terms of a career promotion refers to advancing an employee s rank or position in a hierarchical structure in marketing promotion refers to increasing intention on a product through advertising or a discounted pric...
how do you show a promotion on a resume
you can show a promotion on a resume by listing it as a separate line item above your previous job your goal should be to demonstrate that you had escalating responsibility while working for a single company this is often done by listing each role on a different line to clearly show job growth
what is a health promotion
according to the world health organization s website health promotion allows people to gain control of their health in a variety of social and environmental ways that are designed to benefit and protect individual people s health and quality of life by addressing and preventing the root causes of ill health not just fo...
what is cross promotion in marketing
cross promotion in marketing is when one brand collaborates and teams up with another brand to promote each other s products across multiple marketing platforms for example retailer j crew sells clothing and accessories from other designers on its website under the marketing promotion called brands we love 9
why is getting promoted at work important
for some it isn t if you re entirely happy with your job and your pay a promotion may not be important to you for others seeking more money or more responsibility a promotion is a crucial step to developing one s career the bottom linea promotion can occur in marketing careers the stock market and even global health en...
what are proof of funds
proof of funds pof refers to a document or documents that demonstrate a person or entity has the ability and funds available for a specific transaction proof of funds usually comes in the form of a bank security or custody statement the purpose of the proof of funds document is to ensure that the funds needed to execut...
when an individual or entity is making a large purchase such as buying a home the seller usually requires proof of funds this ensures not only that the buyer has the money available to make the purchase but also has legal access to the funds as the proof of funds comes from a verified authority such as a bank particula...
it s important to note that in the majority of instances the proof of funds must refer to liquid capital primarily cash certain investments such as retirement accounts mutual fund accounts and life insurance do not qualify as proof of funds requirements of a proof of funds documents
when providing a proof of funds document there is certain information that is required to be included the following are some of the most common pieces of information that will need to be disclosed on a proof of funds document
if the funds you plan to use for the purchase are spread across multiple accounts you will need this information for all of them it may be easier to move all of your funds into one account therefore having to provide this information only once and making the total amount of funds available easier to follow it is possib...
what types of documents can be used as proof of funds
common types of proof of funds documents include bank statements investment account statements balance certificates issued by financial institutions and letters from financial institutions confirming the availability of funds
how recent should the proof of funds document be
the freshness requirement for proof of funds documents can vary but generally documents no older than 90 days are considered acceptable be mindful that certain circumstances may call for documents no older than 30 days for example when closing on a mortgage your mortgage lender will often require proof of funds documen...
are there any specific formatting requirements for a proof of funds document
while formatting requirements may vary the document should clearly display necessary information such as the account holder s name account number financial institution details and the available balance in addition to substantiating the financial information the user of the proof of funds documentation will want suffici...
what is proof of stake pos
proof of stake is a blockchain consensus mechanism for processing transactions and creating new blocks a consensus mechanism is a method for validating entries into a distributed database and keeping the database secure in the case of cryptocurrency the database is called a blockchain so the consensus mechanism secures...