Question

You speak to a business owner that is taking in almost $2,000 in revenue each month. the owner still says that they’re having trouble keeping the doors open. how can that be possible? use the terms revenue, expenses, and profit/loss in your answer.

Answer 1

A company with that amount of revenue still saying that they hardly keep the doors open is probably because the profit is maybe negative. Profit is calculated by subtracting the total cost, that is the summation of the fixed cost and the variable cost, from the revenue. Even if the revenue is high, if the cost is also high, the profit will remain low. 

Answer 2

When the expenses of the business than its revenue, the business will have trouble keeping the doors open.

The major aim of business is profit making. A business survives when the revenue of the business is greater than its expenses. Revenue is money that comes into the business while expenses is money that leaves the business.

Money enters into the business as profit but leaves the business as looses, tax, salary, mortgage, etc. If the expenses of the business is greater than its revenue, the business will have trouble keeping the doors open.

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