# Profit function for a small business

I have financial statements for a small business. How does one generate a profit function based on those financial statements?

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#### Solution Preview

The profit function maximizes profit as a function of p, w, and r (where p is the price per unit, w is the wage, r is the price of capital). A profit function is generally depicted as profit = py - wl -rk (y is the number of units produced).

However, in practical terms, a profit function gives us the firm's profits as a function of units sold. We then write it as

P(q) = R(q) - C (q). The profit function is then defined in terms of the revenue and cost functions.

The revenue function gives us revenue as ...

#### Solution Summary

Generationg profit functions from financial statements are examined.

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