How is profit defined?

Profit is defined as the difference between income and expenses. This definition captures the fundamental concept of profit, which indicates how much money a business has earned after all costs of operation have been covered. When a company earns income from selling goods or services, it also incurs various expenses such as production costs, salaries, rent, and other operational costs. The profit is what remains after subtracting these expenses from the income.

Understanding this definition is crucial for analyzing a business’s financial health, as profit provides insights into whether the business is operating efficiently and sustainably. It reflects the effectiveness of management in generating more income than the costs incurred, which is essential for long-term success and growth.

The other options do not accurately define profit. Total revenue earned does not account for expenses, so it cannot reflect profit. An increase in market share is not directly related to profit, as a company could expand its market share while still operating at a loss. Total expenses alone also do not represent profit, as they omit any income generated by the business.