Costs are described as fixed or variable.
Fixed costs plus variable costs are known as total costs:
Image source: https://mba651fall2007.wikispaces.com/Average+variable+cost
Figure 1: Illustration of Fixed and Variable Costs.
This is the total amount of money coming in to a business from sales of goods or services. It is a ‘top-line’ figure that excludes deductions of tax, interest and dividend payments. It also usually excludes discounts for early payments and customer returns.
This is often referred to as the ‘bottom-line’ and is the result of subtracting costs from total revenue. It can be expressed as gross profit which is revenue minus the variable cost of goods. It can also be expressed as net profit which also takes off the relevant amount for fixed costs, tax and so on. Profit is perhaps the most important indicator of how well a business doing.
Various calculations, or ratios, can be used to analyse the relationship between costs, revenue and profit. One would be the profit margin. This is found by dividing the profit figure into the revenue figure and allows you to see how well the company controls its costs to turn revenue into profit.
Source: Essay UK - http://www.essay.uk.com/free-essays/accounting/costs-revenue-and-profit.php
If this essay isn't quite what you're looking for, why not order your own custom Accounting essay, dissertation or piece of coursework that answers your exact question? There are UK writers just like me on hand, waiting to help you. Each of us is qualified to a high level in our area of expertise, and we can write you a fully researched, fully referenced complete original answer to your essay question. Just complete our simple order form and you could have your customised Accounting work in your email box, in as little as 3 hours.
This Accounting essay was submitted to us by a student in order to help you with your studies.
This page has approximately words.
If you use part of this page in your own work, you need to provide a citation, as follows:
Essay UK, Costs, Revenue and Profit. Available from: <http://www.essay.uk.com/free-essays/accounting/costs-revenue-and-profit.php> [26-07-17].
If you are the original author of this content and no longer wish to have it published on our website then please click on the link below to request removal: