Question

You speak to a business owner that is taking in almost $2,000 in revenue each month. The owner still says that they’re having trouble keeping the doors open. How can that be possible? Use the terms revenue, expenses, and profit/loss in your answer.

Answer 1

Answer: They need to pay their employee (another expense). Now the $1500 is down to $1400. They would have utilities to keep their lights on and insurance and many other expenses.

Answer 2

Let's say for example that the business is taking in $2000 of revenue. That is the amount that the business collected for it's services - like for fixing the computer. What if though it costs $500 for the equipment (that's an expense). Now they only made $1500. Now the customer complains and says that the computer isn't fixed properly so the company sends out a techie for 2 additional hours. They need to pay their employee (another expense). Now the $1500 is down to $1400. They would have utilities to keep their lights on and insurance and many other expenses.

Your profit looks like this:
Profit = Revenue - Expenses