Relation to prot or loss continued revenue is

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Unformatted text preview: lation to Profit or Loss, continued Revenue is different from profit in that revenue is the total amount a business takes in, whereas profit is the amount remaining after business expenditures. Obviously, not all businesses will reap the same level of profit. There is no single standard for balancing risk and profit when you start a business. How much risk you are willing to tolerate is a personal decision. You can make an informed decision. Calculate the risks. Estimate the potential rewards. Be aware that the more risk you endure, the higher the rewards you may reap. And also remain aware that the more you risk, the more you risk losing if your business venture is unsuccessful. Economics 3 Key Economic Indicators: GDP - Gross Domestic Product (even if company is foreign-owned, its production is included in GDP of the country where company resides. GDP doesn’t include profits from companies’ overseas operations. Growth of GDP leads to an increased standards of living. If GDP growth slows or declines, businesses can suffer many negative side effects. Unemployment rate (number of persons aged 16 and older who are unemployed and tried to find a job within the prior four weeks in US). Consumer Price index (CPI; it’s important because wages, rents, tax brackets, interest rates, and so on, are based on these statistics. You should consider them to be successful. Economics is a central concept in business. Other Economic Indicators There are other indicators of the health of the economy. For example, the budget deficit or national debt shows the relationship between spending and income from taxes. A budget deficit occurs when a nation spends more than it takes in from taxes. It is similar to a revenue loss in business. The budget deficit is an important economic indicator because to reduce the debt to a manageable level, the government either must increase revenues (raise taxes) or reduce spending on defense, legal, or social programs. The effects can be significant on business and society. Another indicator of the economy’s condition is the producer price index, or PPI, which measures wholesale price levels. Other indicators include housing starts, retail sales, and changes in personal income. WHERE GOVERNMENT GETS ITS MONEY WHERE GOVERNMENT SPENDS ITS MONEY individual income 44.2 c human resources 63 c social security, medicare, and other payroll taxes 39.7c national defense 17.5 c corporate income taxes 8.8 c interest 7.9 c excise taxes 3.6 c physical resources 5.9 c other 3.7 other 5.7 c Economic Cycles Economies are like living organisms. They grow and change, expand and contract. Economic expansion or boom happens when economy is growing and people are spending more money. This stimulates the production of more products. This, in turn, stimulates employment. Recession or contraction occurs when there is a decline in spending and business cut back on production and lay off their employees. It’s 2 or more consecutive quaters of decli...
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