Saturday, February 6, 2016

Can a business earn a gross profit but incur a net loss? Explain.

If you are using the same definitions that I am aware of,
yes, it is possible.  This is because a gross profit does not take into account various
kinds of costs that would be accounted for when figuring net profits and
losses.


Specifically, gross profit generally only refers to
the difference between the revenue you get for selling the product and the costs that
were directly associated with making the product (like the cost of the parts that went
into it).  You do not take into account things like fixed costs (overhead) when figuring
gross profits.


Therefore, you can certainly have a gross
profit but then have a net loss once you subtract out things like overhead that are not
taken into account when calculating gross profit.

No comments:

Post a Comment

Comment on the setting and character of "The Fall of the House of Usher."How does setting act as a character?

Excellent observation, as it identifies how the settings of Poe's stories reflect the characters of their protagonists. Whet...