THE GOAL OF A MAXIMUM PROFIT

PROFIT MAXIMIZATION

 Profit maximization is the main aim of any business and therefore it is also an objective
of financial management. 

Profit Maximization is the ability for company to achieve a maximum profit with low operating expenses.
In economics, profit maximization is the short run or long run process by which a firm may determine
the price, input, and output levels that lead to the highest profit. The company will usually adjust
influential factors such as production costs, sale prices, and output levels as a way of reaching
its profit goal. Profit maximization is a good thing for a company, but can be a bad thing for consumers if
the company starts to use cheaper products or decides to raise prices.

PROFIT

 a financial gain, especially the difference between the amount earned and the amount spent in
buying, operating, or producing something.

Profit is a financial benefit that is realized when the amount of revenue gained from a business activity
exceeds the expenses, costs, and taxes needed to sustain the activity. Any profit that is gained goes to
the business's owners, who may or may not decide to spend it on the business. Profit is calculated as
total revenue less total expenses. Profit is the money a business makes after accounting for all expenses.
Regardless of whether the business is a couple of kids running a lemonade stand or a publicly traded
multinational company, consistently earning profit is every company's goal. As a result, much of
business performance is based on profitability in its various forms.

PROFITABILITY

 Profitability is ability of a company to use its resources to generate revenues in excess of its
expenses. In other words, this is a company’s capability of generating profits from its operations.

The two key aspects of profitability are revenues and expenses. Revenues are the business income. This
is the amount of money earned from customers by selling products or providing services. Generating
income isn’t free, however. Businesses must use their resources in order to produce these products and
provide these services. Resources, like cash, are used to pay for expenses like employee payroll, rent,
utilities, and other necessities in the production process. Profitability looks at the relationship between
the revenues and expenses to see how well a company is performing and the future potential growth a
company might have.

PROFIT AND LOSS STATEMENT

 The profit and loss statement is a financial statement that summarizes the revenues, costs and

expenses incurred during a specified period, usually a fiscal quarter or year.

The Profit and Loss Statement also known as Income Statement. It indicates how the revenues are
transformed into the net income or net profit (the result after all revenues and expenses have been
accounted for). The purpose of the income statement is to show managers and investors whether the
company made money (profit) or lost money (loss) during the period being reported.
Formula:

In order to get the profit, Subtract the total expenses from the total income. The simplest formula is to
be applied and indicate as:

Profit= Total Revenue-Total Expense

Or using this symbol as:

Pr= TR-TC

Examples:

The most simpliest calculation is gross profit, which equals revenue minus costs of goods sold. If your
revenue in a period is P10,000 and COGS are P6,000, your gross profit equals P4,000. You can use an
inverse formula to arrive at revenue when you have both profit and cost. Revenue equals profit plus
costs. Thus, P4,000 in gross profit plus P6,000 in COGS, equals P10,000 in revenue for the period.