Question

Which of the following best describes profit?

1) Revenue generated by goods and services
2) Increases in a corporation's stock price
3) Total money taken in by a corporation
4) Increases in income from year to year
5) Difference between revenues and expenses

Answer 1

The best description of profit is the difference between a company's revenues and expenses. Profit calculation includes accounting for both explicit and implicit costs. total revenue is determined by the product's price multiplied by the quantity sold.

Step-by-step explanation:

Among the options provided, the one that best describes profit is number 5) Difference between revenues and expenses. In business, profit is the financial gain that is realized when the amount of revenue gained from a business activity exceeds the expenses, costs, and taxes needed to sustain the activity. Profit is calculated using the formula: Profit = Total Revenue - Total Cost.

Total revenue is calculated by multiplying the price at which goods or services are sold by the quantity sold, expressed as Total Revenue = Price x Quantity. The costs associated with generating that revenue are known as expenses, which can be both explicit and implicit. While accounting profit considers only explicit costs, economic profit also includes implicit costs in its calculation.