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Chapter 1 Overview of Commercial Business
Chapter 1 Overview of Commercial Business
The relationship
between sales
revenue and
profit
1.3. Goals of Commercial business
• Profit: Making a profit is an objective that is central to many businesses.
Ø The main activity of a business is to sell products to its customers.
Ø A business receives money (sales revenue) from its customers in exchange
for products.
Ø It must also pay out money to cover the numerous expenses involved in
operating the business.
Ø If the business’s sales revenue is greater than its operating expenses, it has
earned a profit.
Ø More specifically, profit is what remains after all business expenses have
been deducted from the business’s sales revenue
1.3. Goals of Commercial business
Small market share gains often translate into large profits for these businesses.
1.3. Goals of Commercial business
§ the number of employees (those who are hired to do work for the business) — a
large number of employees, for example, will suggest that a business is large.
§ the number of owners (of the business) — for example, if a business is a sole trader
(a type of business that has one owner), it is likely to be small. Medium and large
businesses tend to be companies with many owners (or shareholders).
§ the legal structure — for example, is the business set up as a sole trader,
partnership or company?
§ the amount of revenue earned — for example, a large business will earn revenue of
several million dollars annually.
§ the amount of assets owned :
1.3. Goals of Commercial business