Subtract costs or capital(C) to revenue (R) to get the profit (P). Simplified, its R - C = P.
If the result is negative, meaning the income went below zero, it means you are losing profits. If it doesn't go below zero, it means there is no loss in profit however, this doesn't mean that the enterprise is earning big profits.
Related to the topic - Marginal Revenue:Explanation:
Example of calculating profit
Juan spent 500php on sugar, apples and barbeque sticks to make Caramelized Apples. This is Juan's cost or capital (C). He then sold his products and earned 800php. This is Juan's Rrevenue (R).
So, 800 (R) - 500 (C), Juan gained a profit (P) of 300php.
In this sample, Juan gained a profit of 300php, more than half of his Cost.
If Juan sells Carmalized Apples again and profited another 300php out of it, He now has a total of 600php profit. Which means, he exceeded the amount of 500php, his capital or starting cost, and earned a 100php in the process. This is called a Return of Investment (ROI) in the business world.
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