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
Revenue is the amount you gain before accounting for expenses like COGS (cost of goods sold). It’s also sometimes referred to as gross profit.
Profit is the amount earned after accounting for expenses. It’s often referred to as net profit. Profit is purely new money you gained from selling a good or performing a service.
Earnings is another way of saying net profit.
To answer the snippet, it’s saying that JPMorgan made 15% less money in the 4th quarter of their fiscal year compared to the previous quarter, yet was still able to earn an overall profit for the year.
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