Learning the friendly way

Interested in buying Bitcoin on eToro but not sure where to begin? You’ve come to the right place. In this guide, we’ll show you how to buy Bitcoin easily through the eToro platform. Whether you’re looking to buy Bitcoin for the first time, or following an exciting crypto opportunity, you’ll find everything you need to know here. 

What is eToro?

EToro is an online platform that blends social networking with financial trading tools, allowing users to trade stocks, ETFs, and cryptocurrencies in a user-friendly environment without needing technical expertise or separate digital wallets.

EToro’s standout feature, "copytrading," enables users to mimic successful traders' strategies, while also facilitating direct trading between users, further enhancing that social aspect.

How to buy Bitcoin on eToro: a step-by-step guide

Follow these steps to buy Bitcoin on eToro with ease.

1. Create an account on the eToro website

To buy Bitcoin on eToro, you first need to create an account on their website.  Go to eToro's website and click the  “Sign Up” or “Get Started” option, then enter your details.

2. Verify your identity

After creating your account, you will need to verify your identity by providing proof of identification in the form of proof of address and photo ID. Click on the verification link sent to your email and follow the instructions to complete this step. When complete, click on the “verify account” button on the dashboard and wait for the confirmation email from the platform before proceeding,

3. Deposit funds

To buy Bitcoin, you will need funds loaded into your account. eToro offers a variety of payment methods including credit cards, debit cards, bank transfers, and e-wallets like PayPal, Neteller and Skrill. Select your preferred payment method and complete the necessary steps.

3. Navigate to the Bitcoin buying page

Once your account is verified, navigate to the Bitcoin buying page on eToro. Type “Bitcoin” or “BTC” into the search box, select it from the list of cryptocurrencies listed and then click the “Trade” button to go to the Bitcoin page.

From there, select BUY and ensure that the option on the right says “Trade”. This will allow you to buy BTC at the current market price, as displayed. 

4. Select the amount of Bitcoin you’d like to buy

On the Bitcoin buying page, you can choose the amount of Bitcoin you wish to purchase. Enter the desired quantity and click on the 'Buy' button, or enter the units you would like to purchase. 

6. Confirm the trade

Before finalizing your trade, double-check all the details including the amount of Bitcoin, payment method, and transaction fee. Click on the 'Confirm' button to complete the purchase.

The funds will then appear on your dashboard, held for you in a designated wallet. 

Risks and benefits of trading Bitcoin on eToro

Risks of trading Bitcoin

1. Volatility: Bitcoin prices can be highly volatile, leading to the possibility of significant gains or losses in a short period of time.

2. Security risks: Cryptocurrency exchanges like eToro can be vulnerable to hacking and theft, potentially putting your trade at risk.

3. Regulatory uncertainty: The regulatory environment for cryptocurrencies is constantly evolving, which could impact the value and legality of Bitcoin holdings.

Benefits of trading Bitcoin

1. Diversification: Adding Bitcoin to your portfolio can help diversify risk and potentially increase returns over the long term.

2. Potential for high returns: Despite the risks, Bitcoin has shown the potential for significant gains, making it an attractive option for some.

3. Hedge against inflation: Bitcoin's limited supply and decentralized nature may make it a potential hedge against inflation and currency devaluation, offering protection for wealth in uncertain economic times.

Tips for managing risks and maximizing benefits:

• Do thorough research before trading Bitcoin.
• Only use money that you can afford to lose.
• Diversify your portfolio to spread risk.
• Stay informed about market trends, information and regulations affecting Bitcoin.

An eToro alternative: Tap into the future

While eToro offers a user-friendly way to buy Bitcoin, savvy traders often explore multiple platforms to find the best fit for their needs. As the cryptocurrency market evolves, new platforms emerge with innovative features and competitive advantages.

For instance, some newer fintech solutions, like Tap, streamline the buying process even further, offering enhanced security measures and more diverse crypto portfolios. These platforms often provide additional perks like lower fees, faster transactions, or more intuitive interfaces.

As you consider your options for purchasing Bitcoin, it's worth exploring these emerging alternatives. They might offer features that better align with your financial goals and trading style. Remember, the best platform for you depends on your individual needs, experience level, and long-term financial objectives.

Explore Tap’s website or download the app to get started, the processes are simplified and seamlessly guide you through all the features on the app.

Tips for successful Bitcoin trading

Lastly, no matter where you choose to buy and store your Bitcoin, here are some trading tips to ensure you do it right. 

Set financial goals

Before starting your Bitcoin trading journey, it is essential to define clear financial goals. Whether you are looking for short-term profits or long-term growth, having a clear plan in place will help guide your trading decisions.

Diversify your portfolio

It is important to not put all your eggs in one basket when it comes to Bitcoin trading. Diversifying your portfolio by trading in a mix of different assets can help mitigate risk and increase your chances of success.

Stay informed about market trends

Keeping up-to-date with the latest market trends and news is crucial for successful Bitcoin trading. By staying informed, you can make more informed decisions and stay ahead of the curve.

Use stop-loss orders for risk management

One key strategy for managing risk in Bitcoin trading is to use stop-loss orders. These orders automatically sell your assets if they reach a certain price, helping you cut losses and protect your assets.

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This year has seen a gradual but significant improvement in cryptocurrency prices from the chilly crypto winter of 2022. Factors such as cooling inflation and a more relaxed macroeconomic situation have given crypto the space to turn upward and settle in the green. While the road to recovery (to 2021 prices) might be long, there is definite hope on the horizon.

Before we dive in, let’s first review the previous crypto bull runs associated with halvings. When it comes to bull runs, there is a historical pattern of prices rising several months after a Bitcoin halving. This effect tends to take place twelve to eighteen months after the halving event.

This article tends to focus heavily on Bitcoin as the cryptocurrency holds a lot of weight in the industry. Bitcoin market trends tend to dictate the way forward for many other altcoins, while this isn’t black and white, it tends to be the norm. When Bitcoin enters a bull run, so too do other cryptocurrencies, and when the Bitcoin price is down, the same applies. 

What is a Bitcoin halving?

Satoshi Nakamoto, the creator of Bitcoin, strongly believed that scarcity creates value. When designing Bitcoin, it was decided that there would only ever be 21 million coins, and while these can be broken down into small decimal places, there is no changing that maximum supply. 

In order to leverage the scarcity and ensure an even distribution of new coins entering circulation, Nakamoto designed a halving mechanism. The mechanism ensures that the currency remains deflationary, controls how many new coins enter circulation, and plays little havoc on the market. 

To understand how a halving works, one must first understand how Bitcoins are mined. Through a decentralized network, new transactions are entered into a mempool while they await confirmation. Miners will then compete to verify them by completing a complex cryptographical puzzle. The first miner to successfully complete the puzzle is awarded the job of verifying the transactions as well as earning the rewards. 

Once all the transactions have been verified they are executed and the data from each transaction is added to a block, which is added to the blockchain in chronological order. The miner then receives a transaction fee from each transaction as well as a miner's reward for adding a new block to the blockchain. 

Every 210,000 blocks, roughly four years, this reward is halved, making it a significant factor in what is known as the halving experiences. In 2009, the miner's reward was 50 BTC, today it is worth 6.25 BTC. While the price tends to increase substantially, the reward is automatically halved at these intervals. Written into its code, the halvings are automated activities that cannot be altered.

Reviewing previous bull runs

Bitcoin's first mini bull run

The first recorded "bull run" in the crypto sector took place in April 2011 when the price of Bitcoin rose 3,000% over the space of three months. After reaching $1 in April 2011, the coin went on to reach $32 in June. However, this price increase was short-lived as the price returned to $2 in November.

The next year the cryptocurrency underwent its first halving in November, ending the year between the $13 and $14 price mark.

2012 halving / 2013 bull run

In the first few months after the halving, the price rose from $13 to $30. By April, one Bitcoin was trading for $100, its then all-time high, spurring interest from curious outsiders. By November, twelve months after the initial halving, Bitcoin broke the $1,000 barrier. This too was short-lived as the price dropped to around $530 a month later.

2016 halving / 2017 bull run

The next halving took place in July 2016, when the price was trading at around $600. After years of the Bitcoin price bouncing between $100 and $900, it finally hit the $1,000 mark again in January 2017, six months after the halving. By mid-May, the price had doubled to $2,000, and by December of the same year, the price sky-rocketed to just under $20,000.

Sparking a Bitcoin frenzy, the digital asset became a hot topic in mainstream media and many market participants hopped on the bandwagon. This also sparked widespread development within the industry, with many altcoins being launched and what has become known as the "ICO craze". Due to the quick ascent of this nascent technology, user adoption and regulation became prominent topics of discussion in financial and regulatory circles.

By December 2018, just a year later, the price had shrunk to $3,236, while in December 2019, Bitcoin was trading at $7,200.

2020 halving / 2021 bull run

In 2020 the world was struck by the Covid-19 pandemic, causing unprecedented damage to economies around the world. While Bitcoin and other digital currencies took a knock, the industry proved to be much more resilient than most other traditional markets.

Dropping almost 50% to lows of $4,900 in March 2020, the price gradually recovered to $9,000 in May when the next halving took place. The upward price trend continued its climb, reaching $29,374 in December, another all-time high.

In the early months of 2021, the Bitcoin price doubled in value reaching $64,000 in April. By July, it was trading around $30,000 again before skyrocketing to $68,000 in November. By January 2022 the price had corrected to $35,000 before the market was faced with several unfavorable factors.

Markets around the world took another hit when Russia declared war on Ukraine, sending the price of everyday items including fuel soaring. Governments increased interest rates to the highest they've been in decades, and global supply chain issues caused by the pandemic continued to drive upset.

With the world in financial uncertainty, not to mention the demise of several cryptocurrency networks and exchanges, many participants pulled their money from the crypto markets as well as tech-based stock investment markets. This saw the price of Bitcoin dip below the $20,000 mark for the first time in two years, causing widespread uncertainty and speculation.

2022 was officially declared a crypto winter and while prices rose roughly 29% year-on-date, 2023 wasn’t the promised land that crypto enthusiasts had dreamed of. 

Are we headed toward the next crypto bull run?

Price increases aside, the Bitcoin Fear and Greed meter observed ( at the time of writing) a hopeful incline from a state of “Extreme fear” to a “Greed” greed rating. This measure of market sentiment is a vast improvement from 2022 and, alongside expert analysis, indicates that the cryptocurrency has moved into the accumulation phase. According to the Wyckoff market cycles, this is the prerequisite to the mark-up phase and indicates the end of a bear cycle.

The digital asset market remains volatile and unpredictable, and one cannot predict what might happen in the coming months or even years. What we do know is that historically bull runs have succeeded halvings, so grab your popcorn we should be in for an interesting ride. 

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Becoming a homeowner no matter what your income level is an achievable goal with the right amount of planning. Below are a few ideas we've put together for you to think about and implement if you're ready to start taking the steps to make your dream a reality. When it comes to learning how to save money for a house, these steps will make it seem a lot less daunting than one might initially imagine.

Financial steps to take when looking to save for a house

1. Create a realistic timeline

While different people have different timelines, it's important to set a realistic one for yourself when you're planning to buy a house. This way, you can budget and plan accordingly. For example, newlyweds are usually in more of a hurry to buy a home than someone who just graduated or started a new job. One person might be looking at 2 years while the other is okay with 5 years. There is no "right amount of time" to save money for a house, consider your individual circumstances and act accordingly.

2. Kickstart your savings

After establishing your realistic timeline, you can then determine how much you will need to save. While the goal is to put as much money as you can aside, this might be 20% - 30% of your monthly income, so be sure that this is realistic for you and adjust the timeline accordingly. 

Once you've established how much you will be putting aside each month for your goal, set up a direct debit to your savings account to ensure that that money leaves your account before you're tempted to spend it.

You can also explore the option of a savings account that offers the potential to earn interest over time. People often consider money market accounts or high-yield savings accounts. However it's important to conduct comprehensive research and base your decisions on the information you gather.

3. Don’t neglect other financial obligations

In this day and age, instant gratification is something we've grown accustomed to. Saving for a house is the opposite of this and will take time. Instead of cutting off all your expenses to try and reach your goal a year or two sooner, consider what financial obligations you might have over the next few years and be realistic in setting a healthy amount of time to get there. 

4. Ensure your goal is within your means

Becoming a homeowner is an impressive accomplishment, but being riddled with debt and high maintenance costs for decades is hardly enjoyable. Ensure that the house you want to buy is within your means to maintain after the purchase, and consider additional costs like rates and taxes, transfer fees, and consider the associated monthly payment.

5. Make the necessary budget cuts

In order to achieve your saving goals within the amount of time you set out, you will inevitably need to cut back on your expenses. Once your living expenses and bills are accounted for, what can you afford to put away each month? Are you paying for a subscription you no longer use or have a luxury item you can cut back on? It might seem like a little each month but in a year this can amount to a lot of money for your housing fund. 

6. Consider increasing your income streams

Another great way to get your homeowner dream to fruition faster is to create new avenues of income. Multiple streams of income can alleviate your cutting back on expenses and can help your savings tenfold. Consider creating online courses, writing blogs, or building a side hustle aligned with one of your skill sets. Every little bit helps. 

Homeowners checklist: consider the closing costs

Once you have reached your financial goal of saving money for a house or your down payment fund, you'll now be faced with a new set of challenges: actually buying the house and putting that down payment to work.

At this stage, it's important to contact professionals that can assist you in finding, vetting, and deciding on a worthy property for your years of savings, and who can accurately advise on the closing costs of the transaction. Remember that there are lawyers' fees and transaction costs and even private mortgage insurance monthly payments to consider on top of the home's purchase price.

Whether you rely on an experienced real estate agent or a building surveyor, ensure that they are someone you can trust and that you get answers to the questions you ask. Some helpful questions to start with include:

• Is the land government approved?
• Why are the owners selling?
• Are all the house papers/documents intact?
• Is the area prone to natural disasters like floods or fires? 
• What are the costs of utilities, etc? 

Putting your down payment savings to work

Learning how to save money for a house is the first step. When you're ready to take the next step and purchase a house, be patient and ask the right questions. Saving for a house is saving for your future, so don't try to hurry the process along too much.

Whether you'll be living in the house or using it as an investment property with tenants, understand that the journey is as important as the end goal, and have patience as you pursue your dream and get steps closer to making that first down payment.

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In line with our how-to-budget pieces, today we're looking at how to monitor your spending. There's no good in building an impressive budget without keeping track of whether you're sticking to it or not. Yes, it might sound tedious, but it is always worth it, especially during the festive season when things tend to get a little out of control.

Paving the road from good intentions to excellent outcomes, tracking your spending is imperative.

Why tracking expenses is important (use your bank account to save money)

Before we get started, let's first cover the bases of why this step is so vital. First and foremost, it's essential to hold yourself accountable to your proposed budget. There's no good assigning each dollar you earn to a specific function only to disregard the budget entirely and spend impulsively.

If you're not tracking your expenses you'll land up in square one where you started a month ago. Monitoring your spending habits will show you exactly where your money is really going, and help you to make more informed decisions. The best part is that after a month or two you will get the hang of it and the process will become a lot less tiresome and feel like more of a habit.

Keeping an inventory of your expenses (and income)

First, you'll need to create your budget. Once this is established and the time frame you've set it out for has started, it's time to get tracking. You can do this through a budgeting app, a spreadsheet, or a piece of paper if that makes you most comfortable.

Step 1: track your income

In your income section, confirm all income in the columns provided. If you make money in an unexpected avenue, be sure to add this in too. This step is particularly important for those that earn irregular income through freelancing or side hustles.

Ideally, you would have listed your income avenues as a low estimate, so revel in adding the higher amounts into the columns provided. You can then enjoy reallocating those funds to various items in your expenses column. Don't think you need to be a robot with your finances, you're allowed to enjoy them too.

Step 2: track your expenses

For this step you need to track every single time money leaves your account. For the entire month. From emergency fund allocations to debt payments to monthly expenses, and any payments on a separate spending account. Each time you spend money, record it in the relevant expense categories.

When you buy groceries, add this to your grocery expenses; when you eat out, add this to your entertainment expense. Make sure that your budget is updated to reflect the new total so that you and your checking account are always in the know.

For example, if your grocery budget is $100 and you spend $23, add the $23 as an expense item under the title and ensure that your new grocery total reflects as $77.

There are plenty of expense tracker apps out there if this helps you stay on track. If you are using a budgeting app be sure to check in and review how each category is doing so that you can make informed decisions on what you spend your money on.

Step 3: make it a habit

You might like to do this daily or biweekly at first until you get the hang of it. Make yourself a nice cup of tea and make it a pleasant habit, instead of something you resent and put off. Understanding your cash flow is imperative to understanding your spending patterns and to better manage money. This is where the magic happens (and how financial goals are achieved).

Different methods of tracking your expenses

Below we outline the four most common methods used to track expenses, looking at the advantages and disadvantages of each of them. Whether you prefer paper receipts or accounting software, settle for the expense-tracking method that works for you.

1. Handwritten

There's nothing wrong with the old-school pen and paper option, if this feels right to you then go for it! Make sure you store it in a safe space.

Advantage: studies suggest that writing things down increases your retention of the information and boosts your ability to make more informed decisions. While typing is probably the preferred method, writing is actually more efficient when it comes to learning.

Disadvantage: this option is more time-consuming and will require you to physically remember all your purchases and retain your slips. Alternatively, you could sit with a printout of your bank accounts and manually write out each expense.

2. The cash process

This step requires you to withdraw the cash outlined in each budgeted category and store it in an envelope. Every time you make a transaction, you use the cash from the relevant envelope and replace it with the receipt. For debit orders, you can use your imagination. While the envelope method might be considered an old-school option for money management, if it works for you then go with it.

Advantage: using this method of tracking monthly expenses you can physically see how well your budget is going and how much you have left to spend.

Disadvantage: in these modern times paying with cash isn't always very practical.

3. Spreadsheet

Probably the more common option when it comes to tracking your expenses, using a spreadsheet can be practical and it does the maths for you.

Advantage: with tons of templates, the ability to quickly customize or revise your budget and the automated calculator, spreadsheets are a great option.

Disadvantage: you'll need to physically sit down with your laptop when tracking all your transactions. This will become more challenging the longer you leave it so ideally you;ll need to make this a daily occurrence. Remember, without monitoring your expenses your budget is simply a plan.

4. Budgeting apps

There are several budgeting apps available (for free) that can link to your bank account and automatically track all your expenses.

Advantage: It's all done for you, in real-time. Some apps might require you to assign the transaction to a category while others might automatically categorize it for you, either way, it requires minimal effort and can be regularly updated.

Disadvantage: You still need to monitor your spending, even if you're not physically putting it in. If you've reached your grocery budget, you need to be aware as the app is not going to cut your spending for you.

In conclusion

In a nutshell, tracking your spending isn't a chore – it's your financial roadmap. Budgets are great, but without tracking, they're like plans without directions.

Imagine this: you've got goals, and tracking is how you reach them. It's not about being a money expert; it's about knowing where your money's going and making savvy choices.

Sure, it might feel a bit tedious at first, but it becomes a rewarding habit. Whether you use an app, spreadsheets, or good old pen and paper, what matters is sticking with it. Every tracked expense is a step closer to those goals you've set.

So, whether you're noting expenses in a notebook or tapping into an app, keep it up. It's your money's way of showing you its path, and your way of keeping it on track.

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Porter’s 5 forces is a model that helps to identify the weaknesses and strengths of an industry, empowering the potential investor with insights. In fact, the model is used by more than just investors, companies and analysts also make use of its structure, allowing them to analyze the competitive forces in an environment and build an appropriate business strategy.

Below we outline how the Porter’s five forces model works, where it came from, and how you can use it to your advantage. 

What is the Porter's Five Forces model?

Porter’s Five Forces focuses on identifying and analyzing five competitive forces within an industry that can be used to establish what the industry’s strengths and weaknesses are. The five forces analysis can be applied to any segment of the economy and can determine a company’s business strategy, level of competition, or long-term industry profitability. 

The Five Forces are:

• Competitive forces in the industry
• Potential of new entrants into the industry
• Power of suppliers
• Power of customers
• The threat of substitute products

This model is designed to help analysts and managers comprehend the competitive landscape that a particular company faces and how the company is positioned within it.

Where did Porter’s Five Forces model come from? 

The five forces analysis model was created by and named after Michael E. Porter, an established Harvard Business School professor. The model was introduced in Porter’s book, Competitive Strategy: Techniques for Analyzing Industries and Competitors.

Developed in 1979, the five forces analysis model was created to provide industry outsiders with insight and knowledge into the positioning and competitive strength of an organization. The business analysis model has become an important tool in the financial sector and is still widely used today, over 40 years later.

Breaking down Porter’s Five Forces

Below is a breakdown of the Five Forces analysis model which is universal across almost every market and industry in the world. The model looks at the company’s positioning within the market to determine how much power it holds. 

1. The competition in the industry

The first of Porter's Five Forces analysis model focuses on the number of competitors a company has and its ability to undercut them. The more existing competitors and competitive rivalry a company has, along with the number of similar products and services they offer, the less power the company holds. 

When the company has a high level of competitive rivalry, suppliers and buyers will gravitate toward the lower prices, while when competition is low, companies have more control over the prices they charge and the terms of their deals.

More power equates to a competitive advantage which typically equates to more sales and profits. Hence, why industry competition and competitive forces shape strategy.

2. The potential of new entrants into an industry

Of course, new entrants into the market also pose a threat to a company’s power. This can be measured by looking at the amount of time and cost it would take to be a potential competitor. The more resources needed, the more established the company’s position. 

The stronger the barriers to entry, the better for companies already positioned in the market. 

3. The power of suppliers

This point in Porter's five forces analysis model looks at the power the suppliers hold in terms of driving up the costs of resources. This can be determined by looking at the number of suppliers available, how unique their products are, and the cost of a company switching to another supplier. 

The fewer the number of suppliers, the more a company depends on them in turn driving up the supplier’s power. The supplier then has more control over their input costs which can result in lower profits for the company. 

4. The power of customers

The power of customers looks at how much control the consumer has to drive a company’s prices down. This looks at the number of customers a company has, the impact of each customer, and the cost of finding new customers or markets to sell to. 

The smaller the customer base, the more power they have to negotiate lower prices. While a larger customer base with many smaller clients is able to charge higher prices and in turn increase profitability. 

5. The threat of substitutes

The final of Porter’s Five Forces analysis model is the threat of substitutes and looks at the threat that substitutes goods and services can pose to a company. The more unique and more difficult a product or service is to substitute, the better the company’s positioning. As consumers will have little else to turn to, the company automatically accumulates more power. 

These Five Forces analysis can assist a company in building a strategy that ensures well-utilized resources and boosted profits, however, this strategy will need to be consistently visited to ensure that any changes in the external environment are factored in. 

What are the downsides of Porter’s Five Forces?

The most pressing downside of the Five Forces model is that it was designed to look at an individual company, as opposed to the wider industry. Additionally, this proves difficult when the company falls into two or more industries, making the framework less impactful. 

The final downside is that the model is designed to measure all five aspects equally against each other which isn’t always the case. Some factors might be more prevalent in one industry but less relevant in another. 

Porter's Five Forces Model vs SWOT analysis

Another tool used in the business sector is SWOT analysis, which looks at the strengths, weaknesses, opportunities, and threats of existing companies. When comparing the two the most prominent differentiation is that Porter’s Five Forces model tends to examine the external environment and competitive strategy of a company while SWOT looks at the internal aspects of an organization. 

In conclusion

This business analysis model aids in assessing the competitive landscape within a company's industry. The level of influence a company wields across these factors could potentially shape future profitability.

Porter’s Five Forces forces company’s to look beyond their organization and at the greater industry structure in order to map out future plans and strategies. While this framework still plays a valuable role in the business sector, it should not be the only tool used by a company to determine its strategy. 

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In this article, we're helping you understand the difference between the two terms: revenue vs profit. While both are imperative to a business, understanding the difference between revenue and profit is imperative to you navigating the landscape. 

The primary goal of every business is to make money. In order to do so, firms must understand how they are going to generate revenue and where their resources will come from in the future. Primary operations are those that a company conducts in order to produce, sell, or provide goods or services with the aim of making money. 

The total amount of income generated by the sale of things or services associated with the company's core activities is known as revenue. After all the costs have been subtracted, profit is the amount of cash remaining after accounting for all expenses, obligations, supplementary streams, and operational expenditures. In the quest to discover the difference between revenue and profit we break these two concepts down below.

What is revenue?

The top line, or revenue, of an income statement, is typically referred to as the top line because it sits at the top of the income statement. Before any costs are subtracted, a company's revenue is how much money it makes.

For example, the money a grocery store makes from selling its goods before accounting for any expenses is its revenue. Income is not considered revenue if the company also has income from investments or a subsidiary company, as these don't come from the sale of goods. Additional income streams and various types of expenses are accounted for separately.

What is profit?

On the income statement, profit is typically known as net income, however, the term "bottom line" is more common among people. Profits appear on an organization's income statement in a variety of ways and are used for various purposes.

There are other profit margins​ that come before net profit, such as gross profit and operating profit.

Gross profit

Gross profit equals revenue minus the cost of goods sold, which consists of the direct material and labor expenses related to creating a company's products.

Operating profit

Operating profit equals gross profit minus other business expenses that are associated with running the company, such as rent, utilities, and payroll.

At the end of the day, profit is the amount of revenue a business brings in minus all operating and production costs.

Revenue vs profit

When people refer to a company's profit, they are usually referring to the net income, which is what's left after expenses. It is possible for a company to make money but still have a net loss.

In an example below illustrating the importance of understanding revenue and profit, say a company makes $10 million in the income generated. This sounds great, however, if the company's core business operations and debt add up to $12 million, the company is making a loss. Let's take a look at this example in greater detail below:

Business revenue or Total Net Sales: $10 million

Gross Profit: $4 million (total revenue of $10 million minus COGS of $6 million)

Operating Profit: $2 million (gross profit minus other business expenses such as rent, utilities, and payroll)

Profit or Net income: –$2 million (illustrating that the company is making a loss)

Profit will always be lower than revenue as this amount is determined after deducting all the operating and other costs. 

In conclusion

Companies base their success on two very important metrics: revenue vs profit. While revenue is referred to as the top line, a company's profit is what really matters and is referred to as the bottom line.

It is crucial for investors to take both revenue and profit into account when making investment decisions, and to review the company's income statement in order to get a full view of the company's financial health.

In summary, revenue denotes a company's earnings prior to considering expenses like debts, taxes, and other operational costs. Conversely, factors in all company expenses and operating costs. When it comes to comprehending the distinction between revenue and profit, the evidence solidifies the understanding.

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