Final answer:
Profit in a business is mainly conceptualized as accounting profit or economic profit. Accounting profit refers to the revenue minus explicit costs, while economic profit includes implicit costs as well. Returns to shareholders can be through dividends or capital gains.
Step-by-step explanation:
The subject of the question relates to how profit is treated in a business context. Profit is defined as Total Revenue minus Total Cost. It is important to understand that there are different ways to regard profits, such as accounting profit and economic profit. Accounting profit is essentially the cash concept which is the total revenue minus explicit costs- essentially what is brought in minus what is paid out. Economic profit, on the other hand, takes into account total revenue minus all costs, including both explicit and implicit costs. This distinction is crucial for determining the true economic success of a business, beyond what is reported for taxation purposes.
When discussing shareholder returns, they can take the form of dividends, which are direct payments, or capital gains, which represent the increase in value of an asset between the purchase and sale price. Both dividends and capital gains are fundamental aspects of what investors consider as a return on investment.