Profits are defined as:

Profits are defined as the difference between total revenue and total costs. This means that to calculate profit, one needs to determine how much money a business earns from sales (total revenue) and subtract from that the expenses incurred to produce those goods or services (total cost). The resulting figure represents the profits, which can either be positive (indicating a profit) or negative (indicating a loss).

The correct answer emphasizes this fundamental relationship in business, illustrating how profit serves as a key measure of a company’s financial health. Understanding this concept is crucial for evaluating business performance, making investment decisions, and assessing overall economic activity.