How is profit calculated?

Profit is calculated by subtracting expenses from revenue. This formula reflects the core concept of accounting where profit represents the financial benefit gained by a business after accounting for all its costs. When a company earns revenue, this is the total income generated from its activities such as sales of goods or services. By deducting the total expenses, which include costs like salaries, rent, utilities, and other operational expenditures, you arrive at the profit figure.

The other options do not accurately depict how profit is calculated. For instance, adding expenses to revenue or liabilities to expenses does not result in a meaningful financial metric related to profit. Instead, it may lead to figures that do not convey the profitability of a business. Understanding this calculation is vital for assessing a company's financial health and performance.