Incremental profit vs. incremental revenue: What’s the difference?

Incremental profit and incremental revenue may appear similar, but they are two different terminologies.

Incremental profit refers to the money a business makes due to a specific change or decision. For instance, increasing product prices or introducing a new product. On the contrary, incremental revenue is the additional revenue earned from that same change or decision.

The incremental profit takes into account the incremental costs. In simpler terms, incremental profit is incremental revenue minus incremental costs.

Note: To avoid confusion, it is important to note that both terms are often used interchangeably despite their distinct focus.