The Stock Market

Firms and Profits - Definitions

Definition of Firm

So what is a firm in simple words? When a group of people assemble in order to start a business, that business is called a company, or a firm. The business can be a manufacturer, such as Ford, or a provider of services, such as a laundry. If a company is big enough, it can be listed on a stock exchange.


Definition of Profit

Profit is the difference between the money that a company spends (its costs) and the amount it receives (its revenue). Profits are usually measured over fixed periods of time:

Annually, semi-annually, or every three months (quarterly). For example, if a company sold $400 million worth of goods in 2006, and its expenses totaled $390 million, it earned a $10 million profit for that year.

Every company traded on a stock exchange must publish a quarterly report listing its revenue, costs, and profits for the quarter, among other things.

Net profit refers to a company’s profit after taxes have been deducted.

Firms and Profits - Definitions573Firms and Profits - Definitions