How to Solve Profit With Cost and Revenue
- 1). Select a time frame. Profits vary seasonally and over the years, so you need to know what time frame you will be working with. Annual profits are very indicative of a business, but you may also want to use monthly profits or weekly profits, especially during seasonal peaks and troughs (such as summer for an ice cream shop).
- 2). Determine your revenue over the time frame. Revenue is all the money your business brought in at face value, and before you factor anything else out of it. The total number of dollars that went into your hands at any point is your revenue.
- 3). Determine your cost over the time frame. Cost includes every expense required of your business -- taxes, employee salaries, rent, mortgages, inventory, etc. Also, for more advanced analysis, remember to separate fixed cost (the costs you must pay every month regardless of quantity of business, such as rent) from variable cost (the costs that vary based on how much business you do, such as the number of new items you purchase).
- 4). Solve for profit using the equation P equals R minus C. This can be read as, "profit equals revenue minus cost." Subtract your costs from your revenue, and this resulting figure is your profit.
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