Excess profit refers to the additional funds that a business generates after covering all of its expenses. It is akin to having leftover money after purchasing all necessary items. In some jurisdictions, businesses are only permitted to distribute dividends (profits to shareholders) from excess profit. It is crucial for businesses to have excess profit in order to save for the future or to invest in new ventures.
Surplus profit, also known as undivided profit or accumulated profit, refers to the additional money a business earns after covering all its expenses. This profit has not yet been distributed to the owners or shareholders of the business. In certain jurisdictions, dividends can only be paid from surplus profit. For instance, if a company generates $100,000 in revenue and incurs $80,000 in expenses, the surplus profit would amount to $20,000. Another type of profit is gross profit, which is calculated by subtracting the cost of goods sold from the total sales revenue. Net profit, on the other hand, is determined by deducting all expenses from the total sales revenue. Operating profit is obtained by subtracting all operating expenses from the total sales revenue. Additionally, there are profits associated with land ownership, such as profit à prendre, which grants the right to extract resources like minerals or timber from the land. A profit can be appurtenant, benefiting a specific piece of land, or in gross, allowing independent exercise regardless of land ownership. For example, a farmer may possess a profit appurtenant to their land, enabling them to graze their cattle on a neighbouring plot. Similarly, a mining company may hold a profit à prendre to extract minerals from a designated area of land.
Surplus profit refers to the excess profit earned by a company after all expenses and taxes have been paid.
Surplus profit is calculated by subtracting all expenses, including taxes, from the total revenue earned by a company.
Yes, surplus profit can be distributed to shareholders in the form of dividends or reinvested back into the company for future growth.
Yes, there may be legal restrictions on distributing surplus profit, such as the company’s bylaws or regulations set by the government or regulatory bodies.
Yes, surplus profit can be used to pay off debts owed by the company.
The tax implications of surplus profit can vary depending on the jurisdiction and the company’s tax structure. It is important to consult with a tax professional for specific advice.
Yes, surplus profit can be used for executive bonuses or employee incentives, but it is subject to the company’s policies and regulations.
Surplus profit is typically recorded as retained earnings on the company’s balance sheet, in accordance with generally accepted accounting principles (GAAP).
Yes, surplus profit can be used for charitable donations or corporate social responsibility initiatives, but it is subject to the company’s policies and regulations.
Using surplus profit for expansion or acquisitions can have legal implications, such as compliance with antitrust laws or regulations governing mergers and acquisitions. It is important to seek legal advice before proceeding with such initiatives.
This site contains general legal information but does not constitute professional legal advice for your particular situation. Persuing this glossary does not create an attorney-client or legal adviser relationship. If you have specific questions, please consult a qualified attorney licensed in your jurisdiction.
This glossary post was last updated: 17th April 2024.
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