Subtracting costs from revenue is used to calculate what?

Subtracting costs from revenue is used to calculate a business's profits, or the amount it made over the amount it spent. The formula is: Profit (P) = selling price (SP) - cost price (CP).

If a business spends more than it makes, subtracting the cost price from the selling price will show a negative profit, or loss, for a business. Whether a business can generate profits or losses is important for determining how to finance a start-up company, or whether or not it is worthwhile to run an existing organization.