Grades 6, 7 and 8 - Math - Middle School - Business Math - Calculating Profit and Loss — Flashcards

A profit is the gain you receive on an investment you make.  This includes interest earned on a savings account.  However, in business, a profit is the amount made above and beyond what it cost you to buy a product (unit cost).  For example, if you buy pens to sell and you buy 50 pens for $5.00 each and then you sell each pen for $12.00, when you sell a pen for $12.00 you then subtract your cost of $5.00 leaving you a profit of $7.00 (also referred to as the gross profit).

From the gross profit you must then subtract your overhead expenses (or operating expenses) leaving you a net profit.  In order for a business to survive it must have a continuous net profit and very little net loss (when the overhead expenses are greater than the gross profit).