Factors Affecting Profit Project #2 :: Snapshot Principles of Business

Definitions Profit: the difference between revenues and costs (expenses) Profit motive: to make money $$$ Income: the amount of money received during a period of time in exchange for labor or services Expense: something spent to attain a goal Cost of goods: the direct costs attributable to the production of the goods sold by a company

Operating expense: the expense a business incurs as a result of performing its normal business operations Gross profit: a company’s total sales revenue minus its cost of goods sold Net profit: the amount of money earned after all expenses, including overhead, employee salaries, manufacturing costs, and advertising costs, have been deducted from the total revenue

Factors Affecting Profit Number of employees Salaries of employees Cost of capital goods Source of products sold Advertising budget Overhead The economy Demand Chance Expenses Pricing

Ways to Increase Profit Sell more products Increase price on products Look for ways to save on overhead Increasing sales – decreasing expenses

Why Businesses Need Profit Reinvestments Research and development Expansion