What is left from revenue after costs have been deducted; the reward for risk. Example: if sales are £120,000 and costs are £85,000, profit is £35,000. Profit is essential for long-term survival. Revenue – Costs = Profit. There are several calculations for profit, including: Gross Profit = Revenue – Direct Costs (Cost of Sales); Net Profit = Gross Profit – Indirect Costs (Also known as trading or operating profit). Profit is the reward for the risk taken when setting up and running a business. Profit is, in fact, vital to the long-term success of any organisation in the private profit making sector of the economy. This is because a business can survive for a certain period of time on borrowed funds or funds raised by selling shares. (In fact, many businesses do not achieve a profit until their third or fourth year of operation, and some even longer). However, a business cannot borrow money for ever. Owners and shareholders require some return on their investment and lenders need to be secure in the knowledge that their debt will eventually be settled. Consequently, profit is essential for long-term survival.