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Profit: how much money is kept

Profit is revenue minus everything: wages, rent, materials, marketing, interest and tax. It's the bottom line, and it's what actually belongs to shareholders.

A company can be enormous and unprofitable, or modest and very profitable. Amazon spent years deliberately choosing the first while it built out warehouses.

Profit can also swing on one-off events — a legal settlement, a factory sale, a write-down. That's why investors look at several years rather than one.

Remember

Big revenue with no profit is a busy business, not necessarily a good one.

See a real example

Compare Apple, Microsoft and Coca-Cola

Look at how much of each sales dollar each one keeps.

What this shows

Software keeps far more of every dollar than hardware or drinks, because copying code costs almost nothing.

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