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    Profit function for a small business

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

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    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.