Question

How does revenue affect profit (also called “net profit”)? How do expenses affect profit?

Answer 1

Answer:

See below

Explanation:

1. How revenue affects Profits

Revenue is income that a business receives selling its products or from the services it provides. Income from other sources such as win in lawsuits is also revenue.

A business with high revenue is more profitable than a company with low income. For a business to make profits, its revenues must exceed its total expenditure. Profit is total income minus expenses. After the breakeven, extra sales contribute to profits. The more the sales, the higher the profits. Low revenue makes low profits.

2. How do expenses affect profit?

Expenses are costs incurred by a business in its productions and sales processes. Service providers incur expenses as they provide services to customers.

Expenses have a direct impact on profits. High costs may result in losses. Profits are realized after deducting expenses from revenues.

If the expenses are high, then profits will be minimal. Low expenses will result in high profits.