PROFITS. The advance in the price of goods sold beyond the cost of purchase.
The gain made by the sale of produce or manufactures, after deducting the value of the labor, materials, rents, and all expenses, together with the interest of the capital em ployed.
An excess of the value of returns over the value of advances.
2. This is a word of very extended signification. In commerce, it means the advance in the price of goods sold beyond the cost of purchase. In dis tinction from the wages of labor, it is well under stood to imply the net return to the capital or stock employed, after deductiog all the expenses, including not only the wages of those employed by the capitalist, but tbe wages of the capitalist himself for superm,tending the employment of his capital or stook. Adam Smith, Wealth of Nat. b.
c. 6, and M'Culloch's Notes; Mill, Polit. Econ. c. 15. After indemnifying the capitalist for his out lay, there commonly remains a surplus which is his profit, the not income from his eapita.'1. 1 Mill, Polit. Econ. c. 15. The word profit is generally used by writers on political economy to denote the difference between the value of advances and the value of returns made by their employment.
3. The profit of the farmer and the manufac turer is the gain made by the sale of produce or manufactures, after deducting the value of the labor, materials, rents, and all expenses, together with the interest of the capital employed,—whether land, buildings, machinery, instruments, or money. The rents and profits of an estate, the income or the net income of it, are all equivalent expressions. The income or the net income of an estate means only the profit it will yield after deducting the ohargos of management. 5 Me. 202, 203; 35 id. 420, 421.
Under the term profit is comprehended the pro duce of the soil, whether it arise abovist or below the surface : as, herbage, wood, turf, coals, mine r/4s, stones; also fish in a pond or running water. Profits are divided into profits prendre, or those taken and enjoyed by the mere aot of the proprie tor himself, and progte vendre, namely, such as s.re received at the hands of and rendered by an
ather. Hammond, Nisi P. '172.
4, Profits are divided by writers on politioal economy into gross and net,—gross profits being the whole difference between the value of advances and the value of returns made by their employ ment, and net profits being so much of that differ ence as is attributable solely to the capital employed. The remainder of the difference, or, in other words, the gross profits minus the net profits, has no par ticular name; hut it represents the profits attribu table to industry, skill, and enterprise. See Malthus, Def. in Polit. Eeon. ; M'Cullocb, Polit. Econ. 4th ed. 563. But the word profit is generally used in ales,' extensive signification, and presupposes an excess of the value of returns over the value of advances, 5. Using profit in this more limited and popular sense, persons who share profits do not necessarily share losses ; for they may stipulate for a division of gain, if any, and yet some one or more of them may, by agree ment, be entitled to be indemnified against losses by the others: so that whilst all share profits some only bear losses. Persons who share gross returns share profits in the sense of gain ; but they do not by sharing the re turns share losses, for these fall entirely on those making the advances. Moreover, although a division of gross returns is a divi sion of profits if there are any, it is so only incidentally, and because such profits ars in cluded in what is divided: it is not a division of profits as such ; and under an agreement for a division of gross returns, whatever is returned must be divided, whether there be profit or loss, or neither. 1 Lindley, Partn. Engl. ed. 10. These considerations have led to the distinction between agreements to share profits and agreements to share gross returns, and to the doctrine that, whilst an agreement to share profits creates a partner ship, an agreement to share gross returns does not. 1 Lindley, Partn. Engl. ed. 11. See 10 Vt. 170 ; 12 Conn. 69 ; 1 Campb. 329; 2 Curt. C. C. 609 ; 38 N. H. 287, 30Lf.