Why Does It Make Sense for Unprofitable Firms to Stay

question 131

Essay

Why does it make sense for unprofitable firms to stay in business?

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Definitions:

Profit and Loss Statement

A financial statement that summarizes the revenues, costs, and expenses incurred during a specified period, usually a fiscal quarter or year, also known as an income statement.

Activity-Based Costing

A costing method that assigns overhead and indirect costs to specific products or services based on the actual activities and resources used in the production or delivery process.

Break-Even Point

The point at which total costs equal total revenues, meaning no net profit or loss is realized.

Contribution Margin

The difference between the sales revenue of a product and its variable costs, used to cover fixed costs and profit.