Hi community,
I’m a bit confused about the terms “earnings,” “profit,” and “revenue” in the context of business, especially after reading some financial news. Can someone help break it down for me in simple terms?
From what I understand, revenue is the total money a company makes, profit is what’s left after expenses, and earnings seem to be used interchangeably with both. But I’m not entirely sure.
Here’s a snippet from a news article that adds to my confusion:
“JPMorgan Chase reported a 15% annual drop in Q4 earnings – largely due to a $2.9 billion FDIC rescue fee – but closed out its most profitable year on record.”
If earnings include profit, how can there be a drop in earnings but still have the most profitable year?
Also in what situations is earnings used as profit and in what context does earnings mean revenue?
I appreciate any help in sorting out this confusion. Thanks in advance!
In: Other
Imagine you run a lemonade stand and you spent $20 on materials and ingredients. At the end of the day you have $100 from seeking lemonade.
$100 = revenue
$100 – $20 = $80 = profit.
Then you come back tomorrow and spend another $10 to refill some ingredients. On the second day you only make $95 selling lemonade.
So $95 = revenue
$95-$10 = $85 = profit.
So on day 2 you earned less revenue but also had fewer expenses, allowing more profit.
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