What Profit Is And Why It Is Important:
Overview
Profit is the reward that makes the whole private sector work: it is why people risk their savings to start a business and keep going through the hard years. But profit is also one of the most misunderstood words in business, often confused with the cash in the bank, when the two can tell very different stories.
In this lesson you will learn exactly how a profit is made, why it matters so much to private-sector businesses, and the vital difference between profit and cash. You will be able to calculate profit and explain how a profitable business can still run short of money.
Objectives
- How a profit is made
- Importance of profit to private sector businesses, e.g. reward for risk-taking/ enterprise, source of finance
- Difference between profit and cash
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Lesson Evaluation
Congratulations on completing the lesson on What Profit Is And Why It Is Important:. Now that youve explored the key concepts and ideas, its time to put your knowledge to the test. This section offers a variety of practice questions designed to reinforce your understanding and help you gauge your grasp of the material.
You will encounter a mix of question types, including multiple-choice questions, short answer questions, and essay questions. Each question is thoughtfully crafted to assess different aspects of your knowledge and critical thinking skills.
Use this evaluation section as an opportunity to reinforce your understanding of the topic and to identify any areas where you may need additional study. Don't be discouraged by any challenges you encounter; instead, view them as opportunities for growth and improvement.
- Profit is calculated as: A. total costs minus total revenue B. total revenue minus total costs C. price times quantity D. cash in the bank Answer: B
- A firm sells 2000 units at 15 dollars with total costs of 22000 dollars. Its profit is: A. 8000 dollars B. 22000 dollars C. 30000 dollars D. 52000 dollars Answer: A
- Profit kept in the business to reinvest is called: A. working capital B. retained profit C. revenue D. a dividend Answer: B
- Which statement is true? A. profit and cash are always equal B. a profitable business can run out of cash C. a loss-making firm can never have cash D. cash is revenue minus costs Answer: B
- A firm has revenue of 45000 dollars and costs of 52000 dollars. It makes a: A. profit of 7000 dollars B. loss of 7000 dollars C. profit of 97000 dollars D. loss of 97000 dollars Answer: B
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