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What are Proceeds?

Proceeds

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Proceeds

In finance and commerce, “proceeds” refer to the money obtained from a particular activity or event, such as the sale of goods or assets, issuance of securities, or the operation of the business over a period of time.

For example, if a company sells one of its factories for $1 million, the $1 million is known as the proceeds from the sale of the factory. Similarly, if a company issues bonds to investors and raises $5 million, the $5 million is known as the proceeds from the bond issuance.

In the context of personal finance, proceeds might refer to the money a person receives from selling an asset, such as a house or a car, or from cashing in an investment, such as stocks or bonds.

It’s important to note that proceeds refer to the total amount of money brought in from the activity or event, not the profit or net income. The profit or net income would be the proceeds minus any costs or expenses associated with the activity or event.

Example of Proceeds

Let’s consider an example with a real estate transaction:

Imagine you own a house which you bought 10 years ago for $200,000. Over time, property values in your area have increased significantly. You decide to sell your house and manage to sell it for $300,000.

In this scenario, the proceeds from the sale of the house would be $300,000. This is the total amount of money you received from the transaction. However, this does not necessarily represent your profit from the sale.

To calculate your profit, you would need to subtract any costs associated with the sale. Let’s say you had to pay $20,000 in various fees and commissions (such as real estate agent fees, closing costs, and so on). So, your profit (or net proceeds) from the sale would be $300,000 (proceeds from the sale) – $20,000 (costs) = $280,000.

This illustrates how proceeds represent the total amount of money brought in from a transaction, while profit represents the amount left over after costs are subtracted.

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