Chapter 1: Business Applications of Basic Mathematics
The purpose of a business is to make a profit. To find the profit a company makes in a particular period, say in a given month, you must start with all the money that comes into the company as a result of its operations. Then from that money, which is called the revenue, subtract all the expenses paid to earn it.
Thus you have
Revenue
– Expenses
= Profit
The profit is found on the famous “bottom line.” In accounting it is usually called the net income.
Example 1.0
Suppose that a company’s revenue is earned entirely from sales and that it had expenses of $24,000 in a period during which it had sales of $32,000.
Then,
| Revenue | $32,000 | |
| – | Expenses | $24,000 |
| = | Profit | $8,000 |
| REVENUE: $32,000 | |
| Expenses | Profit |
| $24,000 | $8,000 |
When you study accounting, you will find that it takes considerable effort to find the correct values for the expenses that apply to the revenues for a period.
