11: Calculating costs, revenues and profits Flashcards
1
Q
Profit
A
What is left after costs have been deducted from revenue.
Profit = Total revenue - Total costs
2
Q
Revenue
A
The value of sales made during a trading period.
Total Revenue = selling price X no of items sold
3
Q
Costs
A
These are expenditures made by a business as part of its trading operations.
4
Q
Fixed costs
A
costs that do not change with the level of output or sales.
5
Q
Variable costs
A
costs that change directly with the level of output or sales.
6
Q
Total costs
A
Fixed costs + Variable costs
7
Q
What is profit important to entrepreneurs?
A
- Profit is used as a measure of success by the wonders of a business who have invested capital into it.
- Banks and other lenders will be unlikely or unwilling to lend to a business that does not either forecast a profit - or actually make one.
- It is the return or reward to entrepreneurs and business owners for taking risks with their capital. If no profit is made, this will discourage further investment and may lead to business closure.
- As a surplus, profit provides a source of finance for further expansion of the business.
