Research Article
THE PROFIT IN MODERN WORLD OR IN THE WORLD IN GENERAL
Angela Deliu*
Corresponding Author: Angela Deliu, Republic of Moldova, Chisinau, str. Muncesti, ap. 46.
Received: 20 March 2024; Revised: 01 April 2024; Accepted: 04 April 2024 Available Online: 16 April 2024
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The essence of profit, in a new interpretation, will be shown in this paper as the main result of economic activities. It is a necessary indicator to be obtained by businessmen, for their own maintenance and of their family members and for the possibility to develop uninterruptedly and continuously economic activities. The types of profits are presented in a new interpretation along with the calculation of the expected profit by the producer and the one that is really obtained after performing the economic activity. In this context, we will show the modern essence and composition of the salary, also called natural income.

Keywords: Profit, Natural income, Depreciation, Economic results, Economic activity

INTRODUCTION

Profit and Income - phenomena that require correct economic and legal explanation and interpretation in the modern world or in the world in general. However, profit is the main research topic of the present article.

From what has been followed and analyzed, we consider that today's profit does not decline the real essence. We consider it to be a smaller size than it should have been. In addition, the basis of planning is different. Also, it is not taken normally out from the company, where it should not be, i.e. in the company. Why his place no more in the company. Because, we are waiting this money, that is, we the individuals from business as legal entities, for a better and more prosperous life.

METHODOLOGY

In order to carry out this study, various research methods were used. As a theoretical substantiation, was studied a series of scientific papers; the research was conducted by examining the literature in the economic field. The theoretical substantiation is based on experience, analysis, synthesis, deduction.

THEORETICAL ARGUMENTATION

It is worth mentioning that in the current interpretation, profit is a predicted amount compared to what the company consumes in order to carry out its current economic activity. That is, the current level of profit is provided against the cost of production, the content of which are fixed costs and variable costs. Considering this determination, the profit depends on the level or size of the costs, if the profit at the enterprise decreases, it is said that the costs have increased, if the profit increases-the expenses have decreased. And the most interesting thing is that the company may not even be profitable-and the argument would be that the costs were higher than the sales revenue, these are the indicators the difference between which in essence is the absolute size of the profit. In this case, it turns out that the one who carried out the business has no profit, he is-at a loss. Also, an interesting moment, that the balance sheet shows a loss during the management period, which respectively decreases the level of equity, a moment that does not make economic sense.

As we can see, the chain is long, but the most interesting thing is that for years’ companies continue to show losses in their activities. And then the question arises, how do producers provide themselves? Another moment is that, if a profit is pursued or registered, then the producers cannot take their expected income, the final economic results, they are registered in their own capital as the profits of the previous years. And again, there arises the question for how many years will be the profits accumulated there, and, where there, as long as the bank accounts are in a state when there is liquidity. Another problem is that in this way the size of taxes is also influenced.

So, as we see, something is happening, something is not right, something is not adding up. Therefore, further we propose a new interpretation of profit in the modern world. Due to the fact that current profit does not correspond to the measurement of the final incomes of the producers, people who develop businesses, carry out economic activities in the exchange economy (DELIU, 2021).

MAIN CONTENT

As we know, in order to be in line with the civilized world we should:

  • Work, even beside our household,
  • Act as members of the exchange economy, because only here the main purpose of this activity can be achieved, namely, gaining money, currency.

However, this goal can be achieved only through work performed by individuals in activities as part of the system, the economic cycle, in the exchange economy, where they become legal entities in the form of producers, namely

- manufacturers → are those who develop the business and must take the name of business owners, because they are the ones who are part of the staff / human factor of an enterprise, are those who organize the economic activity;

- suppliers → are the businesses which provide their own production, goods or derived human resources to other producers of the business and can be divided into:

* Suppliers of material economic resources and economic goods, suppliers of goods or attracted materials (DELIU, 2021) →

Are the producers who provide the manufacturers with the economic goods necessary for the production process, which they do not have, because they cannot and do not have the right to manufacture due to lack of specialization, - they are manufacturers who put on the market factors of production except labor factor → the people in their business are the manufacturers, depending on the specialization and production they put on the market (DELIU, SARGU& DELIU, 2021).

* Providers of human resources →  

  • Are the businesses, that provide the manufacturers with derived human resources necessary for the production process and who must be called attracted personnel, who must be considered as the second part of the company’s staff, in addition to the incumbent staff (DELIU,2016).
  • Are the manufacturers, which are attracted from outside by other manufacturers, depending on their abilities, intellectual and / or physical capacities necessary for the business and economic activity.

In this way we have established two types of suppliers:

  1. Of material resources-businesses-suppliers of goods or attracted materials;
  2. Of human resources-businesses-suppliers of human resources, who can be employed in the business according to the legislation in force, depending on the admissible age and the income obtained must be registered in the bank account as a legal entity.

From the above mentioned, it should be noted that manufacturers and suppliers, depending on their activity, must be received as incumbent staff and also, it is found that any manufacturer can be a supplier as well, if his production can be used to the production of another good related to tertiary affairs.

As previously mentioned, all businesses expect certain economic benefits, certain economic effects, from their economic activities. These economic advantages or effects must be received as the profits of the manufacturers, from the developed economic activities, from the work done.

Respectively, regardless of the type of business, they all expect the achievement of certain results, which are identified as final income from the development of their labor activities, either production or supply, but the difference will be in their size, especially at manufacturers providing human resources.

IN-DEPTH RESEARCH

In economic essence, economic effects or advantages, the final results must be considered as the profits of businesses, of persons carrying out economic activities, by producing products or providing services.

Therefore, it is admissible that PROFIT-is an absolute economic indicator, which expresses the amount of money obtained by the business after performing an economic process, depending on his specialization and is determined as the sum of natural income and depreciation of own fixed capital.

So, profit is the final result of the performed work, which any business expects from the realization of the economic activity.

In Table 1 we describe the profit calculation formula in the new interpretation.

So, in Table 1 we have exposed the general formula for calculating profit as an economic category. As we can see, two main indicators contribute to the calculation or formation of profit, namely:

  1. The natural income of the producer or the well-known “salary” and
  2. Depreciation of own fixed or capital investment (DELIU, 2012).

It is to be admitted that according to the proposed theory, these indicators are the one that form the fixed expenses of the enterprise to be used in determining the Break-Even Point.

So, producers opt for profit, whether they are manufacturers of goods or suppliers of human resources, so, there is a need to scrap the given value so that the money is available for use according to the destination in social life by the incumbent workers. At the same time, in enterprises the number of full-time employees can be higher than 1, i.e. the company may have several workers, with the status of full-time staff and therefore there is the problem of distributing the general profit among business members, because profit must be received as individual economic effect.

Thus, depending on these 2 main reasons, we propose 2-two forms of profit:

  • General profit - it is an annual amount and refers to the entire full-time personnel-the profit of the enterprise in a current period of time;
  • Individual profit - the given amount belongs to an incumbent worker-the profit of an incumbent worker in a period of time:
  • 1 Annual - annual amount, which belongs absolutely to the incumbent worker;
  • 2 monthly - is a monthly amount, which is given on average to one incumbent worker.

Further in tables Table 2 & Table 3 we will present the profit calculation formulas, in the new interpretation, as economic indicators.

Respectively, in Table 2 we propose the formula for calculating the general profit.


So, in Table 2 is given the formula for calculating the general profit or the company profit, as current, annual amount and in general terms:

  • Annual amount-means that the profit is expected for a management period, starting with January 1 and ending on December 31 → 01.01-31.12.20Tt - a period recognized world and has an objective and classical aspect;
  • General aspect - means that the profit is the amount belonging to all employees, when it is greater than 1.

Further, in Table 3 we will present the formula for calculating the individual profit, annually and monthly, in the new interpretation.

So, in Table 3 is presented the formula for calculating the individual profit, as an annual and monthly amount:

  • Annual amount-means that the profit is meant for an incumbent worker for an annual management period;
  • Monthly amount-means that the profit is in the average monthly amount of an incumbent worker.

It should be noted that, according to the proposed theory, depending on the performed volume of work, the level of profit may vary over time, the inequality between supply and demand, however cannot be higher than production capacity and its work indicators based on business (DELIU, SARGU, 2021).

The non-realization of the profit according to the capacity must be received as the non-realization of the plan provided by the producer, i.e. the real profit is lower than the planed/expected profit.

Noteworthy is also the fact that according to the proposed theory, depending on the results achieved from the production selling, depends the size to be scrapped:

If the quantitative results or sales revenue are less than the set production capacity, then foreign income is excluded depending on the total volume of work submitted but not achieved, and the remaining value will be the profit achieved in the current period.

This moment is argued by the fact that only natural income and depreciation are obtained through work as value-added, and the other part of income, i.e. the cost of materials and works performed, are investments in current equity capital that must allow the continuous reproduction of the business developed according to the provided production capacity.

According to the proposed theory, there can be that:

  • The depreciation of fixed capital may not be fully recovered or
  • The natural income or the so-called salary of the producer may not be received in the expected amount, and of course
  • The cost of materials and the work attracted is not fully recovered-and in this way, it must be admitted that this represents the real risk in business.

However, in the view of personal security in the real aspect of the business, it must be considered that, first of all, the investments were not recovered and then the unearned natural income.

Thus, the profit can be:

  • By production capacity -

Planned or expected profit-the money expected to be obtained from the business;

  • By sales revenue -

Real profit-real money obtained from the business.

Further in Tables 4 & 5 we propose the formulas for calculating the general profit, respectively according to the production capacity and according to the sales revenues.


In order to understand the essence of the natural income of producers, in Table 6. we propose the essence of natural income in the new interpretation, in the social essence and in annual individual aspect, based on the determination of the natural income of the producers.

Respectively, we start with Table 4 where we propose the formula for calculating the general and individual profit, according to the production capacity.

In Table 5 we propose the formula for calculating the general and individual profit, according to the sales income.

So, in Table 6 we propose the method of calculating the natural income or the level of the salary in real essence and in the new interpretation under the conditions of the modern world.

We have shown that natural income, which must allow the producer and his family members to maintain their current maintenance and secure the future in social life, is a complex size, consisting in the depreciation of livelihoods, current maintenance and the economies that must be in the family, as a reserve.

Thus, the natural income is the amount of money needed by individuals involved in economic activity to ensure a normal social life in addition to that shown in the natural economy, it is the level below which it cannot be applied, because it is provided as the minimum optimal level.

So, in Table 6 we propose the formula for calculating the natural income in the new interpretation in social and individual aspect.

So, knowing the level of natural incomes imposed in society, the natural incomes of manufacturers cannot be set lower in size according to production capacity.

Below we present an example of profit calculation in the new interpretation. In Table 7 we expose the initial data for the given calculation, and in Table 8 the calculation itself. 

Further in Table 8 we propose the direct calculation of the absolute size of the profit, depending on the situation proposed in Table 7. We will show the calculation of the profit also according to the capacity with the work indicators and according to the sales income and the calculated labor productivity.

So, in Table 8 we have exposed a situation in which the degree of selling capacity is less than 100%, i.e. the sales income is lower than the value of the production meant for sale, as the production capacity, which imposes that the expected profit has not been achieved. And so, according to the proposed theory, we see that the level of profit depends on the volume of work done.

As we see, the natural income by capacity could not be higher than 2160 thousand m.u., because the breakeven point was in the amount of 2000 u.p. and the price of 6000 m.u. So, we followed how the principle of personal safety works in practice, if capital investments are planned first, then for real, first of all, the natural income is scrapped, and what remains-are the investments.

If we do not operate with business planning by capacity, then the level of production / performance of production or production intended for sale in the current period, after debit turnovers and initial balances, must be accepted as production capacity.

CONCLUSIONS

So, in this article, we proposed a new interpretation of the essence of profit-as an economic category, we proposed the real essence of this indicator in economic life.

We have shown that profit is the amount of money obtained through work from the development of economic activities in the exchange economy. We have exposed the profit components, which consist of two elements, namely natural income and depreciation of fixed capital, which can be called general natural income. We have described the types of businesses and their essence in the economic system, we proposed a new interpretation to such indicators as production capacity and labor productivity, where we showed that calculated labor productivity is also the size of real profit. We have proposed the essence of own capital, which is related to fixed capital and working capital. We introduced a new notion, namely the natural income, which is part of profit.

Two types of profit were proposed, depending on the achievements, and for each we have formulated and presented the formulas and calculation technique:

  • The plans profit, which shows the amount of money that the traders expect or projected according to the production intended for selling in a current period of activity, and
  • Real profit, which shows the amount of real money obtained by producers or real depending on the production sold directly or according to sales revenue.

We have shown that the labor volume in the exchange economy is measured by direct achievements, but not by the level of production or what we would like to achieve, so it I imperative that we analyze the market, demand and supply, since in the wrong aspect, namely in -a larger size, the value of fixed capital and of capital investments can be planned, that is why it is not always mentioned that the work is done in deficit. In particular, we have shown that if the capacity is not reached, first of all investments are not recovered, because the principle of personal safety is put as ground, and, according to this principle, it turns out that life comes first and then the recovery of investments.

We believe that this is the real essence of profit, namely in this aspect it must be accepted in economic life. This theory is the one that must be applied in the modern world.

 

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  2. DELIU, A., SARGU, N., & DELIU, A. (2021). Analiza rezultatelor activităţii economice şi economia indicilor. Inter Conf, 46, 6-22.
  3. DELIU A. (2016). Salariul venitul natural al producătorului sau persoanelor fizice antrenate în economia de schimb. Chişinău În materialele conferinței fostering knowledge triangle în Moldova - conference proceedings, pp: 105-112.
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