In calculating profits, profits are derived after which costs have been calculated?

In calculating profits, profits are derived after which costs have been calculated?

• A. Operational costs
• B. Taxes
• C. Depreciation
• D. Marketing costs

Answer: (A)

Profits come from taking the money the business brings in and subtracting the costs needed to keep the business running. The most immediate, ongoing expenses to account for are the operational costs—rent, utilities, wages, supplies, and other day-to-day expenses. These are the costs that must be covered before any surplus from the core activities can be considered profit. After you’ve accounted for these operational costs, you would then subtract other items like taxes, depreciation, and any other costs that affect profit, which explains why those elements can further reduce the final profit figure. In short, the primary step in deriving profits is to deduct the operating costs from revenue.

Profits come from taking the money the business brings in and subtracting the costs needed to keep the business running. The most immediate, ongoing expenses to account for are the operational costs—rent, utilities, wages, supplies, and other day-to-day expenses. These are the costs that must be covered before any surplus from the core activities can be considered profit. After you’ve accounted for these operational costs, you would then subtract other items like taxes, depreciation, and any other costs that affect profit, which explains why those elements can further reduce the final profit figure. In short, the primary step in deriving profits is to deduct the operating costs from revenue.