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Intermediate · 3 min

Revenue is not profit

Revenue is the amount received from sales. Accounting profit subtracts explicit costs; economic profit also accounts for opportunity costs such as the owner’s next best use of time and capital. A business can receive a great deal of revenue while earning little profit. Always state which cost measure is being used.

Practice

A stall receives 500 in sales and has 350 in explicit costs. What is its accounting profit?