Chapter 8, Problem 11AA

To determine

To evaluate the importance to include the value of time while calculating the profits.

Explanation of Solution

Profit is the extra income generated from the selling of an extra product. Profit is the financial benefit from sales minus expenditures. Time value of capital is a crucial concept for investors because the dollar now is value more than the dollar predicted to be in the future. Provided the money will generate interest, this central finance theory holds that the faster it is earned, every sum of money is worth more.

Until diverting into assessing profit margin that require knowing what it is. The profit margin of the company determines what percentage of income company retains after paying outgoing expenses. This will measure the profit margin at a particular period of time to see profitability.

Economics Concept Introduction

Introduction: Profit is equivalent to the income of a corporation, minus the expenses. Working in small business field, making a profit is crucial because profitability determines whether a company can obtain financing from a bank, attract investors for financing its operations, and grow its business. If companies make a profit they cannot stay in business.