How is profit defined in business?

In business, profit is defined as total revenue minus total costs. This definition captures the essence of profitability, which measures how much money a company retains after all its expenses have been accounted for. Total revenue represents the income generated from sales of goods or services, while total costs encompass all expenses associated with running the business, including fixed and variable costs such as salaries, rent, production costs, and utilities.

Understanding profit in this way is crucial for assessing a company's financial performance. Higher profit indicates effective management of resources and can lead to reinvestment opportunities, shareholder returns, and overall business growth. Conversely, if total costs exceed total revenue, the company experiences a loss, highlighting potential inefficiencies or market challenges.

The other definitions do not accurately convey the concept of profit. Revenue minus total debts focuses on a company's liabilities rather than its profitability. Total sales minus expenses might suggest profit but lacks clarity regarding the specifics of what constitutes total sales and expenses. Finally, total assets minus total liabilities pertains to the company's net worth or equity rather than its profit. Thus, the correct answer provides a comprehensive understanding of how profit is determined within a business context.