If a firm's sales revenue exceeds its expenses, the firm has earned a profit.
No. Operating profit margin usually means profit in terms of strict cost and revenues of the firm itself. Actual profit margin includes other, non-firm specific costs, such as payment of debts (which is not part of operation but still a liability of the firm).
Economic profit will never exceed accounting profit. The accountant will calculate total cost using only explicit costs (basically a transfer of money) that the firm makes. On the other hand, .
gross profit is divided by net sales.
To increase profit the firm will decrease output to a point where MC=MR. This is the Profit Maximisation point
total revenue minus total cost
The 'value of a firm' is connected with profit maximization. It is the present value of the firm's current profit and the future profit. It determines the value accurately.
The 'value of a firm' is connected with profit maximization. It is the present value of the firm's current profit and the future profit. It determines the value accurately.
Economic profit will never exceed accounting profit. The accountant will calculate total cost using only explicit costs (basically a transfer of money) that the firm makes. On the other hand, economists will factor in opportunity cost as well. For example, if a person takes their life's savings and invests it in a new company, the interest that the money could be making will be an opportunity cost for the firm, as well as the salary they could be earning at a different firm. This all means that economists will calculate higher costs, which means that economic profit is lower than accounting profit.
If a firm's sales revenue exceeds its expenses, the firm has earned a profit.
Debt Service Coverage Ratio = Interest payable on debt/Net Profit
In economics, normal profit is often called the break-even point. It is the level of profit where all of the costs of your business, including the salary of the CEO, are covered. When a firm has normal profit but not economic profit, the total revenue of the firm equals the total cost of the firm. However, if a firm has economic profit, total revenue is higher than total cost.
leveraged firm is good because it has low risk than unleveraged firm while earning same amount of profit.
There is no exact ideal gross profit margin and it depends on size of firm, the industry in which firm is operating and many other factors like competitors profit and market segmentation etc.
a firm is in equillibrim when it attains its maximum profit
No. Operating profit margin usually means profit in terms of strict cost and revenues of the firm itself. Actual profit margin includes other, non-firm specific costs, such as payment of debts (which is not part of operation but still a liability of the firm).
We should calculate the profit on sales