Profits can be calculated by subtracting total cost from total revenue. Total revenue refers to the income generated from the sale of goods or services, while total cost includes all expenses incurred in producing those goods or services, such as materials, labor, and overhead costs. Subtracting total cost from total revenue gives the amount of money left over after all costs have been paid, which is the profit. This is the most common and straightforward method of calculating profits for a business.