Total revenues minus total costs equals:

Total revenues minus total costs equals:

• A. contribution margin
• B. unit breakeven
• C. profits before owner compensation and taxes
• D. future value profits

Answer: (C)

The calculation of total revenues minus total costs results in profits before owner compensation and taxes. This means that it reflects the net income of a business after accounting for all operating and associated costs but before deducting expenses linked to ownership, such as salaries for the owners or taxes owed. Understanding this concept is vital in evaluating the financial health of a micro enterprise. It provides insight into how much money the business is earning from its core operations, allowing owners to assess whether the business is sustainable and profitable. This figure is often used in budgeting and financial planning, as it indicates the resources available for reinvestment, owner compensation, and tax obligations. Other options relate to different financial concepts. Contribution margin involves the sales revenue remaining after variable costs are deducted, unit breakeven refers to the number of units that must be sold before a business covers its costs, while future value profits pertain to expected profits based on investment growth over time. Each of these plays a role in financial analysis but does not directly capture the relationship defined by total revenues minus total costs in the context indicated.

The calculation of total revenues minus total costs results in profits before owner compensation and taxes. This means that it reflects the net income of a business after accounting for all operating and associated costs but before deducting expenses linked to ownership, such as salaries for the owners or taxes owed.

Understanding this concept is vital in evaluating the financial health of a micro enterprise. It provides insight into how much money the business is earning from its core operations, allowing owners to assess whether the business is sustainable and profitable. This figure is often used in budgeting and financial planning, as it indicates the resources available for reinvestment, owner compensation, and tax obligations.

Other options relate to different financial concepts. Contribution margin involves the sales revenue remaining after variable costs are deducted, unit breakeven refers to the number of units that must be sold before a business covers its costs, while future value profits pertain to expected profits based on investment growth over time. Each of these plays a role in financial analysis but does not directly capture the relationship defined by total revenues minus total costs in the context indicated.