Question

Revenue less expenses equals:

a. Cost of merchandise sold
b. Net income or net loss
c. Gross profit on sales
d. Gross profit

Answer 1

Revenue-less expenses equals net income or net loss, which reflects a company's financial performance as profit or loss.

Step-by-step explanation:

Revenue-less expenses equals net income or net loss. This calculation is fundamental in business and accounting, providing a clear picture of a company's financial performance over a specific period. Total revenue represents the income a firm generates from selling its products, calculated by the formula: Total Revenue = Price × Quantity. Expenses are the costs incurred in the process of earning revenue. When expenses are subtracted from total revenue, the result is either a net income if revenues exceed expenses, or a net loss if expenses are greater than revenues.

For example, if a firm has total revenues of $125 from selling five units at a price of $25 each and total costs of $130, the firm experiences a net loss of $5.

Therefore, the correct answer is b. Net income or net loss.