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If a venture's revenue is increasing but its expenses are increasing faster, what is the most correct conclusion?

Answer and explanation

Correct answer: Profit is under pressure

Profit is broadly determined by revenue minus expenses. Therefore, revenue growth alone does not prove improved profitability. If expenses rise faster than revenue, the difference between them becomes smaller, so profit may decline or turn into a loss. The entrepreneur should analyse the causes and control costs or improve revenue quality; stopping sales immediately or claiming certain success is not justified.

Related tags

RevenueCostProfit-AnalysisConceptNature And Importance Of Business FinanceConcept Nature And Importance Of Business FinanceSources Of Business FinanceBusiness StudiesClass 11 Mcq

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