The term that describes the surplus of income over expenditures is 4. Profit.
The term that describes the surplus of income over expenditures is profit. It represents the net financial gain an individual or organization experiences after all expenses have been subtracted from total income. This positive difference signals financial health and the ability to generate revenue beyond what it costs to operate.
- Income: This encompasses all the earnings received, such as salaries, wages, sales revenue, or investment returns.
- Expenditures: These are all the costs incurred to generate income or run the business, including costs of goods sold, operating expenses, taxes, and interest payments.
- Profit: When income exceeds expenditures, the result is a profit. This demonstrates the efficiency of operations and the ability to generate financial value.
Profitability varies across industries and individual circumstances. Companies and individuals strive to maximize their profits for various reasons, including:
- Sustainability: A consistent profit ensures long-term financial stability and the ability to reinvest in growth or weather economic downturns.
- Growth: Profits can be used to expand operations, invest in new ventures, or attract investors.
- Distributions: Shareholders and owners often receive dividends or payouts based on the company's profit.
Understanding the concept of profit is crucial for making informed financial decisions. It helps individuals manage their finances, choose suitable investments, and evaluate the financial health of potential business ventures.
Q- What term describes the surplus of income over expenditures?
1. The accounting system
2. Corporation
3. Audit
4. Profit