How is profit best defined?

Profit is best defined as the difference between earned income and total expenses. This definition captures the essence of profitability in a business context. Specifically, profit is calculated by taking the total revenue generated from sales and subtracting the total expenses incurred in running the business, including costs such as production, operating expenses, and other outlays.

Understanding this definition is crucial for assessing a company's financial health. Profit reflects not just the income generated from sales, but also accounts for the costs associated with producing and delivering goods or services. This distinction is vital for making informed business decisions, managing budgets, and strategizing for growth. In essence, profit serves as an indicator of a company's efficiency in transforming revenue into actual earnings after expenses have been accounted for.