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Profit

Profit

History of the concept

Contemporary views

Measurement of profit

BIBLIOGRAPHY

Profit is normally held to be the amount by which the total revenues of an enterprise exceed its total costs. There has been much confusion in the literature over terminology, however, and the first task here must be to clear up that confusion. It stems, I think, from the changes which have taken place with the development of the small, owner-managed, competitive firm of the classical period into the great corporation of today. In contemporary corporate enterprises the functions of the plant manager, who works for wages, of the capital supplier, who receives either interest or dividends, and of the entrepreneur, who makes the strategic decisions, must be distinguished. In this article profit will be treated as the return to the corporation determined by entrepreneurial success.

History of the concept

In the days before the modern corporation, when the typical business concern was managed, owned, and directed by one man, his reward included the wages of management, the return on capital, and the gains of entrepreneurship. If wages and raw materials were the total costs, all the rest was lumped together as profit. Thus, Adam Smith, in the Wealth of Nations (1776), speaks of the “profits on stock/’ In Part 1, Chapter 9, he says that “high profits will eat up rents” and indicates that the reward to capital is a real cost, which must be paid to elicit or maintain the supply. In the same passage, Smith distinguishes between profits and interest. The former is the reward to “stock,” or capital, the latter the price paid for borrowed money, i.e., for loanable funds.

Ricardo, in his Principles (see Works and Correspondence, vol. 1), normally treats profit as a real cost, which must be paid to maintain the supply of capital, although sometimes, as Knight (1921) says, it is treated as a residual like rent. Whatever the confusion in the Principles, in his celebrated “Essay on Profits’* (“An Essay on the Influence of a Low Price of Corn on the Profits of Stock”; see Works and Correspondence, vol. 4, pp. 9–41) Ricardo clearly defines profit as the return to capital and its organization in production, i.e., its combination with the other factors.

Alone among the classical writers, Marx (1867–1879) has an explicit theory of profit. Marx offers a simple, two-sector model with two inputs, labor and capital. Labor receives a subsistence wage, which according to the Marxist definition equals the value of the commodity. The market value, or price, exceeds true value, and it is from this “surplus value” that profit is obtained. (The rate of surplus value calculated only on circulating capital differs from the rate of profit calculated on all capital.) Since the only input other than labor is capital, for Marx “profit” is a return on capital. It seems, from his discussion, to include returns to entrepreneurship, but such returns are purely and simply returns to the entrepeneur as the controller of the capital input. Marx’s theory of profit has been called an exploitation theory. He believed that the wage earner will receive only a subsistence wage and that all the rest, the residual, is profit and is a return to capital which is earned because of its bargaining power. Because ownership enables the capitalist to employ labor, he is able to drive a very hard bargain and keep the wage earner to a subsistence wage. The ownership of the means of production is the clue to Marx’s theory of profit. This theory might equally well be called a bargaining-power theory of profit. However, the theory takes no account of the distinct contributions of the capital supplier and the entrepeneur. In fact, the two functions are considered identical or are comprised in the same input. The theory may bear a superficial resemblance to that of the English classical school, but we should note this difference: for the English classical writers, up to and including Mill, the reward to capital was a real cost, that is to say, a cost which must be paid if the supply of capital was to be maintained. It was a reward variously described as a reward for waiting, for abstinence, or for saving; in any case, it involved a real psychic cost. This was not so for Marx. The total reward is a residual and is the amount of surplus value that could be taken from the worker, by reason of the employer’s superior bargaining power, over and above the true value of the product, which is measured by the subsistence of the laboring class.

In Marshall (1890) the confusion disappears. In the stationary state, under conditions of competition, the wages of labor, the reward (now called interest) to capital, the wages of management, and the replacement of capital are all costs. “Normal profits” are made up of the payment to the competitive owner-entrepreneur, i.e., interest on capital invested and wages of management. “Abnormal profit,” a surplus over total costs, is ephemeral in a competitive economy. Profit is therefore a surplus attributed to abnormal circumstances, such as lack of competition or dynamic and unanticipated changes. In the stationary competitive system there is no place for the forward-looking, risk-taking entrepreneur and, thus, no place, except by accident, for profit.

The Continental school (Pareto, Walras, and Wicksell) similarly make no place in their models of general equilibrium for any profit residual. Each input is paid the value of its marginal product, and the sum of the marginal product shares exhausts the total product. These general equilibrium models are based on severe restrictions: in particular the production function is assumed to be linear and homogeneous of the first degree [seeProduction]. The models are static and competitive. Among more contemporary writers the significance of the Walrasian model is shown in the simplified equation system of Phelps Brown (1936) and in Schumpeter’s circular flow equilibrium (1912, chapter 1). Profit could not appear in these models of general equilibrium unless there was a disturbance of the static system or a disturbance of perfect competition. This is made clear when Schumpeter shows that profit within his system can appear only with the emergence of his entrepreneur, that aggressive innovator who introduces improved techniques of production or in other ways alters the production function.

Some modern authors (such as Joan Robinson and Kaldor) use simple two-sector, two-factor models and have only labor and capital as their inputs. Like the classicists and Marx, they speak of only two shares of the national income, namely, wages and profit. Profit in these models is, consequently, the return to capital. This may be a convenient usage, but by not permitting the important distinction between the reward to capital and the reward to enterprise, it leaves the models without the dynamic of the expectational entrepreneur.

Contemporary views

Let us turn now to the question of the source of profit, its nature, and its function in the private enterprise system of contemporary Western society. One is considering here the modern corporation, in which the functions of the plant manager, the owners, and the entrepreneur are distinct. The entrepreneur makes the major policy decisions and must make these decisions in the present although they will bear fruit only in the future. The decisions, therefore, are made under conditions of genuine uncertainty.

The writers of the contemporary period were naturally at first under the strong influence of the neoclassical school in England, of the Continental writers to whom we have referred, and of John Bates Clark in the United States. No profit could be earned under the conditions of equilibrium. Whether equilibrium was defined as the equilibrium of the firm and the industry or whether it was defined, in the Continental manner, as the equilibrium of the system as a whole, there was perfect foreknowledge. Because there was perfect competition, there were no surpluses owing to monopoly, apart from Ricardian rents which might be earned by those monopolists who controlled a resource so scarce that its supply curve was perfectly inelastic. Hence, if one was to talk about profit, one had to turn one’s attention to conditions within the market which were not those assumed by the neoclassical writers. Schumpeter had to introduce into the circular-flow equilibrium that rude fellow, the innovating entrepreneur, a man who foresaw the possibility of profit (even though, under competitive conditions, it was ephemeral) by altering the production function in one way or another, whether by a technological improvement or by improved techniques in management or improved techniques of selling [see Entrepreneurship].

Joan Robinson (1933) and E. H. Chamberlin (1933) showed that profits may be earned and retained by the entrepreneurs who succeed in achieving a privileged monopolistic position in the selling market, or, in the case of Robinson, a monopsonistic position in the factor market. Lerner (1944), Triffin (1940), and Kalecki (1954) also identified the amount of profit with the degree of monopoly. Finally, we may note that Keynes (1930) attributed the incidence of profit to a lack of equilibrium in the system as a whole, that is to say, in his context profit is an accidental windfall occasioned by temporal changes in the price level as a whole. In summary, one may say that all the writers of this period were still strongly under the influence of the equilibrium models of the nineteenth-century writers. They attributed profit to various types of imperfections in the static competitive models of their immediate predecessors.

It was Knight (1921) who created an eclectic theory of profit under which all the previous theories could be subsumed. He treated profit as a residual return earned by the entrepreneur as a result of correct decisions taken in the present to bear fruit sometime in the uncertain future. Distinction must be made between risk and uncertainty. Risk exists when there is uncertain knowledge of a future result of a particular action but when there are adequate data to make a probability calculation. For example, if one is building a new factory, one may provide against loss through fire before it goes into operation by taking out insurance. A risk can always be insured against because there is a sufficient sample from previous experiments to permit an actuarial calculation. Uncertainty, by contrast, exists when the present decision is made under conditions where no probability calculus is possible—when, therefore, the decision maker has to rely upon his own judgment, his intuition, if you will, as well as on whatever data he may accumulate in order to make his decision. (Some mathematicians maintain that the difference between risk and uncertainty is one not of kind, but of degree, depending only on the amount of data available for a sample for experimental purposes. The point cannot be debated here, but we may accept a difference in the degree of experience as adequate to sustain the argument presented in this discussion.)

Knight’s entrepreneur will reduce the area of uncertainty as much as he can. He will insure against risk; he will make forward contracts wherever they are possible; he will accumulate all the data he can. There remains, however, an area in which true uncertainty obtains. There may remain some elements of cost about which he can make no certain calculations. More likely, the strategies of his competitors cannot be exactly estimated. Decision is peculiarly the responsibility of the entrepreneur. If he is, on balance, proved by events to be right in his decisions, a profit will result. If, on the contrary, he is repeatedly in error, the concern will experience negative profits, or losses, and under these circumstances the entrepreneur is not likely to continue in his decision-making capacity. Briefly, we may conclude that the entrepreneur is that person—either an individual or a collective—who makes decisions under conditions of genuine uncertainty, the results of which give rise to profits. These profits may come as a result of decisions concerning the state of the market or decisions which result in increasing the degree of monopoly or decisions with respect to the forward holding of liquid stocks that give rise to windfall gains or decisions taken about the introduction of new techniques or innovations that, if successful, will give rise to innovators’ profits. Thus, all types of profits, whether their origin be in the market structure, in general movements of the price level, in changes in government, commercial, fiscal, or monetary policy, or in successful innovation, may be subsumed in this general concept of profit as the return to the entrepreneur for successful decision making under conditions of uncertainty.

If this is agreed, we have an answer to our question as to the origin of profit. We have now to ask how the entrepreneur makes this decision. This question is the subject of current debate among economists. We may distinguish various answers. There is the theory that the entrepreneur does make some kind of probability calculation, the best possible he can make in the absence of adequate data about previous like situations. Hart (1940) may be considered representative of this school. Others who may be said to belong to the same school have added to the probability view the calculus drawn from the theory of games (von Neumann & Morgenstern 1944). They have argued that it would be possible for the entrepreneur to decide upon his own strategy after having made a calculus of the possible strategies and responses of his competitors. Still others believe that decision making will be largely determined by the data fed to the entrepreneur by his various chiefs of bureau, that is to say, his various technical advisers, his engineers, his accountants, and those who undertake market surveys. Some, also, have argued that forward contracts enable the entrepreneur to make his crucial decisions with the minimum degree of uncertainty and that profit, in consequence, is a kind of accident which, if one may be controversial, can be attributed only to the ineptitude of the entrepreneur. To the present writer it seems as if all these groups have ignored the true meaning of “uncertainty,” which, if we have correctly defined it, rules out these various methods of giving to the entrepreneurial decision a purely rational quality. [SeeDecision making, article oneconomic aspects.]

Another school of thought, which is usually connected with the name of G. L. S. Shackle (1949; 1958; 1961), believes that the entrepreneurial decision partakes of an intuitive element. Shackle goes so far, in one context, as to compare the entrepreneur with the artist rather than the scientist. For Shackle, the crucial or strategic decision is necessarily made under conditions of genuine uncertainty. No probability calculus is possible, whether directly or by use of game theory. Forward contracts serve only to narrow the critical area of uncertainty. Within that area the entrepreneur confronts a series of hypotheses about future results of his decision. Some of these hypotheses will be favorable, some unfavorable; some will be highly surprising, some not so surprising. As these hypotheses are ranged in the decision maker’s view, two will command his attention. One of these (“focus loss”) will appear to him to be the hypothesis with the minimum surprise-loss combination, and the other (“focus gain”) the one with minimum surprise-gain combination. Since the hypotheses are not additive in either the favorable or unfavorable range, choice or decision is made between these two focuses of attention (“attraction” is Shackle’s word). A positive decision results only when the focus gain outweighs the focus loss. This view, while it has been criticized or amplified by many contemporary writers, has acquired a considerable following. [SeeEconomic expectations.] It must not be supposed, however, that it has come to be part of “received theory.” We have shown that many contemporary economists, while taking their lead from Knight, have preferred a more rationalistic theory of entrepreneurial decision making.

The problem of decision making, whatever may be thought in economics, is a wide question and has been examined in recent years by psychologists, sociologists, military strategists, and others. [SeeDecision making.]

It is clear that the above approaches imply that the function of profit is to reward the decision maker. A subsidiary function is to provide a source of new investment funds for the widening or deepening of capital. Perroux (1926; 1957), among others, looks on profit partly as the earning of monopolists but principally as a source of savings for new economic growth. Perroux’s emphasis is on economic development and the sources of capital supply. His colleague Jean Marchal (1951) has advanced what we might call an institutional theory of profit. For Marchal profit is residual, that is, its amount or, more properly, its rate depends in part on institutional factors, e.g., the social acceptance of profit in public utilities as compared with that of profit in highly speculative enterprises. It is not possible in a brief compass to do justice to Marchal, but it seems that his contribution can be comprised in an uncertainty theory.

The position that profit has the function of serving as the reserve fund for capital investment and, thus, as a principal source of funds for economic growth depends crucially upon certain assumptions. We have to consider corporation policy with respect to retained profit as compared with the decisions of shareholders with respect to the disposal of their dividends (one may refer to the works of W. C. Hood [1959] and R. M. Solow [1963]). In this context we have only to note that many modern writers attach a great importance to corporations’ retained profits as a source of new investment. This proposition depends, however, on certain assumptions about the use of retained profit. If the corporation uses its surplus funds or its retained profit for further investment, in the proper sense of the word (that is to say, for increasing its capital structure for productive purposes), then the corporation surplus fund is one source for new capital development. If, however, the corporation tends to hedge by holding a portfolio of various stocks and even government bonds, we cannot regard retained corporation profits as a source of new venture capital. The attitude of corporations toward the use of retained profit must be compared with that of shareholders. If dividends exhausted the total profit of a corporation, then dividends would be reinvested through the capital market and would presumably be redirected by the price mechanism into the most remunerative of new employments of capital. Consequently, there is a case in favor of the complete distribution of all profit. It is not maintained that profit distributed to shareholders will necessarily be invested in a manner approximating the optimum allocation of capital more closely than would be done by the corporation’s allocation of retained profit. It is simply submitted that, contrary to the opinion of some authors who have written about the capital market, there is a case to be made in favor of the full distribution of profits to the shareholders of the corporations.

Measurement of profit

We must now consider the problem of the determination of the amount or rate of profit. From what we have already said, it appears that profit may be treated as a residual left over after the other costs of production have been paid. This proposition, however, leaves us with an unsatisfactory theory of income distribution. As Knight (1935) has said, the treatment of profit and rent as residuals leaves us with no rigorous determination of the difference between one residual and the other. It is necessary to distinguish profit from any other income share. We do not believe that this can be done by marginal productivity theory, which depends on the assumption that the input factor is completely divisible and is homogeneous in quality. The entrepreneur by definition is indivisible, and entrepreneurs are not homogeneous as to quality. Thus, marginal productivity theory, in the strict sense, does not apply, although it is perhaps correct to observe that the entrepreneur who earns a profit is apparently more productive in value terms than his less gifted competitors.

It has been argued by some that the amount of profit is a measure of degree of monopoly (Kalecki 1954; Lerner 1944; and others). The converse proposition would be that the degree of monopoly could serve as a measure of profit. This proposition, however, is unacceptable. From what has already been said, it would appear that monopolistic conditions reduce the degree of uncertainty, and one would expect that the profit sufficient to attract investment under conditions of monopoly would be less than that needed to attract investment under conditions of dynamic competition. Such indeed appears to be the fact. Empirical studies of profit rates do not show that profits increase with the degree of monopoly. (It is only fair to admit that they do not show, on the other hand, that firms in monopolistic competition earn markedly lower profits than firms under conditions of competition.)

It would seem likely that the amount and rate of profit are determined by the degree of uncertainty. If the previous argument is accepted, the more remote the time horizon for the planning period, the higher the degree of uncertainty which must attach to all hypotheses. Thus, we may argue that the degree of uncertainty is a function of the length of the planning period. It would follow that the greater the extension of the time horizon, the higher must be the expected profit if a favorable, that is to say, a positive, decision is to be made. Some economists would like to argue that bargaining power between the entrepreneur and the capital suppliers, on the one hand, and between the corporation and the trade union, on the other hand, is also relevant to the determination of the rate of profit. However, in the eclectic theory put forward above, it would appear that such questions of bargaining power form a part of the entrepreneurial expectations or hypotheses with respect to the future results of present decisions. We may, therefore, conclude that the proper measure of profit is the degree of uncertainty, and if we wish to give a quantitative measurement to such degrees of uncertainty, we may with some confidence do so by the measurement of the extension of the planning period to the time horizon.

B. S. Keirstead

[See also the biography ofKnight.]

BIBLIOGRAPHY

Brown, E. H. Phelps (1936) 1949 The Framework of the Pricing System. Lawrence: Univ. of Kansas, Student Union Book Store.

Brown, Murray 1961 Profit, Output, and Liquidity in the Theory of Fixed Investment. International Economic Review 2:110–121.

Cantillon, Richard (1755) 1952 Essai sur la nature du commerce en général. Paris: Institut National d’Études Démographiques.

Chamberlin, Edward H. (1933) 1956 The Theory of Monopolistic Competition: A Re-orientation of the Theory of Value. 7th ed. Harvard Economic Studies, Vol. 38. Cambridge, Mass.: Harvard Univ. Press.

Clark, John Bates (1899) 1902 The Distribution of Wealth: A Theory of Wages, Interest and Profits. New York and London: Macmillan.

Fossati, Eraldo 1955 Essays in Dynamics and Econometrics. Chapel Hill: Univ. of North Carolina, School of Business Administration.

Hart, Albert G. (1940) 1951 Anticipations, Uncertainty and Dynamic Planning. New York: Kelley.

Hirshleifer, Jack 1961 Risk, the Discount Rate and Investment Decisions. American Economic Review 51, no. 2:112–130. → Contains nine pages of discussion.

Hood, William C. 1959 Financing of Economic Activity in Canada, July 30, 1958. Ottawa: Royal Commission on Canada’s Economic Prospects.

Kaldor, Nicholas 1960 Essays on Economic Stability and Growth. Glencoe, 111.: Free Press.

Kalecki, Michael 1954 Theory of Economic Dynamics: An Essay on Cyclical and Long-run Changes in Capitalist Economy. New York: Rinehart.

Keirstead, B. S. 1953 An Essay in the Theory of Profits and Income Distribution. Oxford: Blackwell.

Keirstead, B. S. 1959 Capital, Interest, and Profits. Oxford: Blackwell.

Keirstead, B. S. 1960 Le profit et ses fonctions. Volume 9, section E, pages 40–42 in Encyclopédic française. Paris: Société Nouvelle de l’Encyclopédie Française.

Keynes, John Maynard (1930) 1958–1960 A Treatise on Money. 2 vols. London: Macmillan. → Volume 1: The Pure Theory of Money. Volume 2: The Applied Theory of Money.

Keynes, John Maynard 1936 The General Theory of Employment, Interest and Money. London: Macmillan. → A paperback edition was published by Harcourt in 1965.

Knight, Frank H. (1921) 1933 Risk, Uncertainty and Profit. London School of Economics and Political Science Series of Reprints of Scarce Tracts in Economic and Political Science, No. 16. London School of Economics and Political Science.

Knight, Frank H. 1934 Profit. Volume 12, pages 480–487 in Encyclopaedia of the Social Sciences. New York: Macmillan.

Knight, Frank H. 1935 The Ricardian Theory of Production and Distribution. Canadian Journal of Economics and Political Science 1:3–25, 171–196.

Lerner, Abba P. 1944 The Economics of Control: Principles of Welfare Economics. New York: Macmillan.

Lundberg, Erik 1959 The Profitability of Investment. Economic Journal 69:653–677.

Marchal, Jean 1951 The Construction of a New Theory of Profit. American Economic Review 41:551–565.

Marshall, Alfred (1890) 1961 Principles of Economics. 9th ed. 2 vols. New York and London: Macmillan. → A variorum edition. The 8th edition is preferable for normal use.

Marx, Karl (1867–1879) 1925–1926 Capital: A Critique of Political Economy. 3 vols. Chicago: Kerr. → Volume 1: The Process of Capitalist Production. Volume 2: The Process of Circulation of Capital. Volume 3: The Process of Capitalist Production as a Whole. Volume 1 was published in 1867. The manuscripts of Volume 2 and Volume 3 were written between 1867 and 1879. They were first published posthumously in German in 1885 and 1894.

Pareto, Vilfredo (1896–1897) 1927 Cours d’économie politique professé à Vuniversité de Lausanne. 2 vols., 2d ed. Paris: Girard.

Perroux, Francois 1926 Le probleme du profit. Paris: Girard; Lyon: Bosc.

Perroux, Francois 1957 Le profit et les progrès économiques. Revue de Vaction populaire 112:1049–1063.

Ricardo, DavidWorks and Correspondence. Edited by Piero Sraffa. 10 vols. Cambridge Univ. Press, 1951–1955. → Volume 1: On the Principles of Political Economy and Taxation. Volume 2: Notes on Malthus’s Principles of Political Economy. Volume 3: Pamphlets and Papers, 1809–1811. Volume 4: Pamphlets and Papers, 1815–1823. Volume 5: Speeches and Evidence. Volume 6: Letters, 1810–1815. Volume 7: Letters, 1816–1818. Volume 8: Letters, 1819-June 1821. Volume 9: Letters, July 1821–1823. Volume 10: Biographical Miscellany. Robinson, Joan (1933) 1961 The Economics of Imperfect Competition. London: Macmillan; New York: St. Martins.

Robinson, Joan 1962 Essays in the Theory of Economic Growth. London: Macmillan; New York: St. Martins.

Schumpeter, Joseph A. (1912) 1934 The Theory of Economic Development: An Inquiry Into Profits, Capital, Credit, Interest, and the Business Cycle. Harvard Economic Studies, Vol. 46. Cambridge, Mass.: Harvard Univ. Press. → First published as Theorie der wirtschaftlichen Entwicklung.

Shackle, G. L. S. (1949) 1952 Expectation in Economics. 2d ed. Cambridge Univ. Press.

Shackle, G. L. S. 1958 Time in Economics. Amsterdam: North-Holland Publishing.

Shackle, G. L. S. 1961 Decision, Order and Time in Human Affairs. Cambridge Univ. Press.

Smith, Adam (1776) 1950 An Inquiry Into the Nature and Causes of the Wealth of Nations. 2 vols., 6th ed. Edited, with an introduction, notes, marginal summary, and an enlarged index, by Edwin Cannan. London: Methuen. → A paperback edition was published in 1963 by Irwin.

Solow, Robert M. 1963 Capital Theory and the Rate of Return. Amsterdam: North-Holland Publishing.

Triffin, Robert 1940 Monopolistic Competition and General Equilibrium Theory. Harvard Economic Studies, Vol. 67. Cambridge, Mass.: Harvard Univ. Press.

Turvey, Ralph 1963 Present Value Versus Internal Rate of Return: An Essay in the Theory of the Third Best. Economic Journal 73:93–98.

von Neumann, John; and Morgenstern, Oskar (1944) 1964 Theory of Games and Economic Behavior. 3d ed. New York: Wiley. → A paperback edition was published in 1964.

Walras, LÉon (1874–1877) 1954 Elements of Pure Economics: Or, the Theory of Social Wealth. Translated by William Jaffé. Homewood, 111.: Irwin; London: Allen & Unwin. → First published in French as élÉments d’économie politique pure.

Weston, J. Fred 1954 The Profit Concept and Theory: A Restatement. Journal of Political Economy 62:152–170.

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return

re·turn / riˈtərn/ • v. 1. [intr.] come or go back to a place or person: he returned to Canada in the fall. ∎  (return to) go back to (a particular state or activity): Ollie had returned to full health. ∎  (return to) turn one's attention back to (something): he returned to his newspaper. ∎  (esp. of a feeling) come back or recur after a period of absence: her appetite had returned. 2. [tr.] give, put, or send (something) back to a place or person: complete the application form and return it to this address. ∎  feel, say, or do (the same feeling, action, etc.) in response: she returned his kiss. ∎  (in tennis and other sports) hit or send (the ball) back to an opponent. ∎  Football run upfield with the ball after fielding (a kick), intercepting (a pass), or recovering (a fumble). ∎  (of a judge or jury) state or present (a verdict) in response to a formal request. ∎  Bridge lead (a card of a suit led earlier by one's partner). ∎  Archit. continue (a wall) in a changed direction, esp. at right angles. 3. [tr.] yield or make (a profit): the company returned a profit of 4.3 million dollars. 4. [tr.] (of an electorate) elect (a person or party) to office: the Democrat was returned in the third district. • n. 1. an act of coming or going back to a place or activity: he celebrated his safe return from the war| [as adj.] a return flight. ∎  [in sing.] an act of going back to an earlier state or condition: the designer advocated a return to elegance. ∎  the action of giving, sending, or putting something back: we demand the return of our books and papers. ∎ Football a play in which the ball is caught after a kick or pass interception and is advanced by running; an advance of this kind. ∎  (in tennis and other sports) a stroke played in response to a serve or other stroke by one's opponent. ∎  a thing that has been given or sent back, esp. an unwanted ticket for a sports event or play. ∎  (also re·turn tick·et) chiefly Brit. a ticket that allows someone to travel to a place and back again; a round trip ticket. ∎  an electrical conductor bringing a current back to its source. ∎  (also re·turn game) a second contest between the same opponents. 2. (often returns) a profit from an investment: product areas are being developed to produce maximum returns. ∎  a good rate of return. 3. an official report or statement submitted in response to a formal demand: census returns. ∎  Law an endorsement or report by a court officer or sheriff on a writ. 4. election to office: we campaigned for the return of Young and Elkins. ∎  an official report of the results of an election: falsification of the election return. 5. (also car·riage re·turn) a key pressed to move the carriage of an electric typewriter back to a fixed position. ∎  (also re·turn key) a key pressed on a computer keyboard to simulate a carriage return in a word-processing program, or to indicate the end of a command or data string. 6. Archit. a part receding from the line of the front, for example the side of a house or of a window opening. PHRASES: in return as a response, exchange, or reward for something: he leaves the house to his sister in return for her kindness. many happy returns (of the day) used as a greeting to someone on their birthday. return thanks express thanks, esp. in a grace at a meal or in response to a toast or condolence.DERIVATIVES: re·turn·a·ble adj. re·turn·er n.

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Return

RETURN

To bring, carry, or send back; to restore, redeliver, or replace in the custody of someone. Merchandise brought back to a seller for credit or a refund. The profit made on a sale; the income from an investment. A schedule of information required by some governmental agencies, such as the tax return that must be submitted to theinternal revenue service.

The official report made by a court, body of magistrates, or other official board charged with counting votes cast in an election. The redelivery of a writ, notice, or other form of legal process to the court after its proper service on the defendant or after it cannot be served.

For example, the Federal Rules of Civil Procedure require a plaintiff to begin an action in federal court by preparing a complaint and giving it to the court. Then the clerk of the court issues a summons and delivers the summons and complaint to a U.S. marshal or a deputy, unless the court designates someone else. That person must take the papers, called legal process, and serve them on the named defendant. The process server must promptly report back to the court the circumstances of the service or the failure to serve the papers.

This report with the process server's signature on it is called the return of service. It recites facts to demonstrate that the defendant has actually been given notice that she is required to appear in court. The failure to make a proper return does not make the service invalid or defeat its effectiveness for starting the lawsuit, but it can be grounds for disciplining the process server. The return is important to the court because it is proof that service was properly made on the correct person and that the action has been legally commenced.

cross-references

Service of Process.

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profit

profit, in economics, return on capital, also called earnings, minus the costs of maintaining land, labor, and capital. It is also known as net income. Economic theorists generally make a distinction between two types of profit: normal profit, in which the entrepreneur receives the minimal necessary amount to encourage him to open or stay in a particular business; and excess profit, that which exceeds normal profit. With the development of the corporation, profits are apportioned between dividends to the holders of stock, and investment and depreciation funds in the control of hired managers. Interest paid on loans is usually considered as separate from profit, and is therefore deducted from the net profit. Profit is often considered to be the major incentive for production in a capitalist economy, although with the decline of the entrepreneur and the rise of a salaried managerial class, it has tended to become less personal and more institutional in character. See also profit sharing.

See F. Knight, Risk, Uncertainty, and Profit (1921); M. Obrinsky, Profit Theory and Capitalism (1983); D. C. Mueller, Profits in the Long Run (1986); S.-Y. We Production, Entrepreneurship, and Profits (1988).

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profit

prof·it / ˈpräfit/ • n. a financial gain, esp. the difference between the amount earned and the amount spent in buying, operating, or producing something: pretax profits | his eyes brightened at the prospect of profit. ∎  advantage; benefit: there's no profit in screaming at referees from the bench. • v. (-it·ed , -it·ing ) [intr.] obtain a financial advantage or benefit, esp. from an investment: the only people to profit from the entire episode were the lawyers. ∎  obtain an advantage or benefit: not all children would profit from this kind of schooling. ∎  [tr.] be beneficial to: it would profit us to change our plans. PHRASES: at a profit making more money than is spent buying, operating, or producing something: fixing up houses and selling them at a profit.DERIVATIVES: prof·it·less adj.

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"profit." The Oxford Pocket Dictionary of Current English. . Encyclopedia.com. 17 Aug. 2017 <http://www.encyclopedia.com>.

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Profit

PROFIT


Profit is the money that remains after the cost of manufacturing, marketing, taxes, interest, depreciation, and any other expenses incurred in the production of a product or service have been deducted from the price subsequently received for the product or service. In a market economy profit is the key element that drives buying and selling decisions. A profit is most easily made when the demand for a product or service far exceeds the supply. In such a situation a higher price can be exacted regardless of the production costs of the product or service. Profit may also be referred to as net earnings, net income, or bottom line.

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"Profit." Gale Encyclopedia of U.S. Economic History. . Encyclopedia.com. 17 Aug. 2017 <http://www.encyclopedia.com>.

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return

return. Any part of a building that turns at an angle (usually 90°) from its principal face, such as the side of a pilaster or the jamb of an aperture. A return forming an oblique angle is a splayed return. If a moulding is continued in a different direction from its main direction, as with a hood-moulding over a medieval window or door returning downwards to a Label-stop, it is referred to as a returned moulding. Similarly, the stalls in a church choir set against screens between the choir and choir-aisles and returning at an angle of 90° at the back of the pulpitum or choir-screen are called returned stalls.

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"return." A Dictionary of Architecture and Landscape Architecture. . Encyclopedia.com. 17 Aug. 2017 <http://www.encyclopedia.com>.

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Profit

PROFIT

Most commonly, the gross proceeds of a business transaction less the costs of the transaction; i.e., net proceeds. Excess of revenues over expenses for a transaction; sometimes used synonymously with net income for the period. Gain realized from business or investment over and above expenditures.

Accession of good, valuable results, useful consequences, avail, or gain. The benefit, advantage, or pecuniary gain accruing to the owner or occupant

of land from its actual use; as in the familiar phrase rents, issues and profits, or in the expression mesne profits.

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profit

profit advantage, benefit; revenue, proceeds XIV; gain in a transaction XVII. — (O)F.:— L. prōfectus progress, profit, f. pp. stem of prōficere advance (see PROFICIENT).
So profit vb. XIV. — (O)F. profiter; hence profiteer (-EER) XX.

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"profit." The Concise Oxford Dictionary of English Etymology. . Encyclopedia.com. 17 Aug. 2017 <http://www.encyclopedia.com>.

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return

return come or go back, lit. and fig. XIV; turn, bring, or send back XV; give back, render XVI. — OF. retorner, returner (mod. retourner) — Rom. *retornāre; see RE-, TURN.
So sb. XIV. — AN. retorn, return.

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profit

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return

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profit

profit •adit •bandit, pandit •accredit, credit, edit, subedit •Chindit • conduit •audit, plaudit •pundit • refit • misfit • benefit •profit, prophet, soffit •forfeit • outfit • Tophet • photofit •buffet, tuffet •comfit • counterfeit • surfeit • agate •margate, target •frigate • Tlingit • hogget •drugget, nugget •Brigitte • gadget • eejit •Bridget, digit, fidget, midget, widget •budget •Blackett, bracket, jacket, packet, placket, racket •blanket • gasket • bedjacket •straitjacket • lifejacket • leatherjacket •downmarket, market, upmarket •basket, casket •breadbasket • Euromarket •Newmarket • hypermarket •Becket, Beckett •cricket, midwicket, picket, picquet, piquet, pricket, snicket, thicket, ticket, wicket •trinket •biscuit, brisket, frisket •identikit •brocket, crocket, Crockett, docket, locket, pocket, rocket, socket, sprocket •airpocket • pickpocket • skyrocket •toolkit •bucket, Nantucket, tucket •Blunkett, junket •musket • rust bucket •circuit, short-circuit

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