One way a business can measure it’s success is by calculating it’s profit or loss.
We don’t need to explain what loss is, but what is profit exactly?
Well firstly, you need to understand Revenue and Expenses.
Revenue is the total amount of money a business has generated over a set period of time.
Expenses are the money spent in order to generate that money; on things like equipment, advertising, and paying workers.
Calculating profit/loss is easy, it’s just ‘Revenue minus Expenses’.
So if you sell a product for $100 dollars, and it cost you $40 to make and sell, you’ve made a $60 profit.
As long as your Revenue is greater than your Expenses, then your making a profit.
If the product you sold for $100 cost you $140 to make and sell, then you’ve made a $40 loss. Whoops.