# Total profit greater than 100 %

Newspapers like Forbes, CNet, WSJ and many other say that it is possible to have total profit of industry more than 100 %.

Examples:

Apple and Samsung account for more than 100% of industry profits because other makers broke even or lost money

Samsung and Apple combined to take 106% percent of the industry's profits. How do they take more than 100%? Well, it's a quirk of the fact that everyone else in the industry is losing money, or breaking even. Apple has 65% of the industry's profits, and Samsung has 41%.

I can't imagine that. Profit means positive value. Negative value is loss. Is it possible to count loss into total industry profit?

When I create an example like this:

Company A - loss 100
Company B - loss 100
Company C - profit 10
Company D - loss 10 = total "profit" -200.

Company C would take -5 % of industry profits.
Company D would take 5 % ...

How it is possible that big newspapers use such irrational math?

• I don't really understand what you are asking. I am not sure that you are asking anything at all. And, sorry that I have to be so blunt but "irrational math" is probably the most stupid thing I have read today. Basically you don't like the definition of profits (I don't know why, maybe because you don't like negative numbers or you hate percentages >100). Jul 23 '15 at 17:53
• Maybe I have explained it not clearly. My point is that how can be total profit more than 100 %. It does not make any sense for me. So the questioin is if it is real economical term that I can count with more than all (100 %) profits or it is just fabrication to make the news more interesting. Jul 23 '15 at 18:54
• I got that. And the answer (to how can total profit be more than 100%) is: Define profit in the way they did. And as long as it is defined in the way it is, it is a real economic term. Your suggested definition of profits is pretty useless, when it comes to describing market. For example. the total profit of some guys playing poker would be pretty large. We are basically filtering the information and only allowing the good firms in the (profit) stats. And why? Just because percentages >100% makes no sense to you? Jul 23 '15 at 19:04
• Not because of me. I just assumed that total profit is a sum of all positive values, negative values excluded. Then it is possible to compare values with percent. According to my example, the value -5 % is hard to imagine. Jul 23 '15 at 19:26

I think this is just a reflection of the casual language of the popular press. What appears to be in dispute in this question is if profits can be negative or if that case is properly referred to as losses. I agree that in many contexts this is at best a confusing usage. Most dictionary definitions are clearly implying that profits must be positive (e.g., "A financial gain", "Advantage", "Benefit", or "income in excess of costs").

I'm comfortable thinking about negative profits as being a synonym for losses. Industry profits can be thought of as the sum of profits and losses of individual firms just like a firm's profits can be thought of as the sum of profits and losses of subsidiary firms. That seems uncontroversial, at least if this total is positive but that doesn't seem like a standard usage. If we accept that profits can be negative and this aggregate is negative we have weird things happening like firms with positive profits making a negative fraction of total profits. Nothing wrong with the math here, but the math may be telling you something difficult to translate into words. If firm level profits were by definition positive then in @denesp's example Apple and Samsung's share of profits would be 100 percent.

The more technical term for a variable that when positive is profits and when negative is losses is Net Income. Wikipedia's page on Net Income says:

In the context of the presentation of financial statements, the IFRS Foundation defines net income as synonymous with profit and loss.

I'd avoid the confusion and not refer to losses as negative profits. Instead I would use the term Net Income. Let's fix that Business Insider quote to use net income:

Apple and Samsung account for more than 100% of industry net income because other makers broke even or lost money

Samsung and Apple combined to take 106% percent of the industry's net income. How do they take more than 100%? Well, it's a quirk of the fact that everyone else in the industry is losing money, or breaking even. Apple has 65% of the industry's net income, and Samsung has 41%.

Now let's use @denesp's example:

Company / Net Income
Apple / \$53 Samsung / \$53
Other / -\$6 Total / \$100

Everything looks good to me here after the change in terms.

• I have added a comment up there. I don't question the math, I know how they count it. It is not logical to me that something is more than 100 %. When you have a look into my example, the only profitable company takes -5 % and it does not matter that it is income or profit. But it seems more logical with net income of the industry and then compare to this value. Jul 23 '15 at 19:00
• It looked good to me before. Calling it "Net Income" or "Profits" does not change a thing, as long as it is made clear that profits are in $\mathbb{R}$ (which is clear by the fact that A + S have > 100% of the profit). Jul 23 '15 at 19:20
• Well. When you say 2 companies take 100 % of profit, it is obvious that other did not earn anything and those 2 companies split the money. If you say that 2 companies take 150 % of profit, it looks like there is some additional 50 % of profit from nowhere. Jul 23 '15 at 19:28
• I think I have realised how to understand it in the way they say it, with the term "net income". I just have to take it as comparison between profit of individual companies to net income of the industry. I still think that it is not correct to call it it industry's profit which would stand for sum of positive values in the industry. That value 106 % is does not say anything because it is hard to compare value. Thanks Jul 23 '15 at 19:42

profit (v.) early 14c., "to advance, benefit, gain," from profit (n.) and from Old French prufiter, porfiter "to benefit," from prufit (see profit (n.)). Related: Profited; profiting. profit (n.) mid-13c., "income;" c. 1300, "benefit, advantage;"from Old French prufit, porfit "profit, gain" (mid-12c.), from Latin profectus "profit, advance, increase, success, progress," noun use of past participle of proficere (see proficiency). As the opposite of loss, it replaced Old English gewinn. Profit margin attested from 1853.

Apart from etymological issues (and one cannot ignore that words acquire new uses all the times), the important question is "yes the Math part is clear. Where are the Economics?

And the answer is "nowhere". To consider how much of its Industry's profits does a corporation claim in percentage terms, may be a valid additional datum in an overall assessment of the performance of the corporation. But here, the reporter just wanted to fill some space and make some useless noise, which he knew an expression like "$106\%$ of profits" could create.

On another front, the OP asks,

"Is it possible to count loss into total industry profit?"

It should always be counted that way. When we decide to look at a whole Industry, we treat it as a "single economic entity". Then to arrive at the Industry's total profit, we naturally add all sales revenues from all participating companies, and subtract all expenses from all participating companies, as though it was one company:

$$\pi_I = R_1 + ...+R_n - E_1 - ...-E_n = (R_1-E_1) + ...+(R_n-E_n) = \pi_1 +...+\pi_n$$

where some of the $\pi$'s may be negative, i.e losses.

This is the logical thing to do because we ask "how much sales revenue did the Industry had, and how much expenses"?