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

A company with that amount of revenue still saying that they hardly keep the doors open is probably because the profit is maybe negative. Profit is calculated by subtracting the total cost, that is the summation of the fixed cost and the variable cost, from the revenue. Even if the revenue is high, if the cost is also high, the profit will remain low.