Sam quit a $30,000-a-year job with a local heating and air conditioningfirm to go into business for himself. After his first year in business, his accountant showed him an income statement, which indicated Sam’s firmhad a profit of $40,000. During this year, Sam drew a salary of $20,000.a. What were Sam’s accounting profit and entrepreneurial profit?b. Explain the difference between accounting profit and entrepreneurial profit.
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Sam quit a $30,000-a-year job with a local heating and air conditioning
firm to go into business for himself. After his first year in business, his accountant showed him an income statement, which indicated Sam’s firm
had a profit of $40,000. During this year, Sam drew a salary of $20,000.
a. What were Sam’s accounting profit and entrepreneurial profit?
b. Explain the difference between accounting profit and entrepreneurial profit.
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- Maury quit his job as an accountant with We Keep Books Accurately toopen his own accounting firm. He earned $40,000 with the accounting firmWe Keep Books Accurately. During the current year, Maury had revenuesof $150,000 and total expenses of $110,000; he did not draw a salary.a. What was Maury’s accounting profit?b. What was Maury’s entrepreneurial profit?Paula has the following information to evaluate—her current salary of $59,000 versus total revenues of $170,000 and expenses of $76,000 from starting a new business. How much is the opportunity cost associated with starting the new business?You should use a financial calculator and Excel to solve the problems. Discuss the differences between efficiency and effectiveness. Why is it important for small business owners to understand the difference between profit and profitability? What financial ratio is used to determine profitability? Sam quit a $30,000-a-year job with a local heating and air conditioning firm to go into business for himself. After his first year in business, his accountant showed him an income statement that indicated Sam’s firm had a profit of $40,000. During this year Sam had drawn a salary of $20,000. What was Sam’s accounting profit, his entrepreneurial profit, and his opportunity cost? Explain the difference between accounting and entrepreneurial profit. Discuss the differences between operating and financial leverage. You are going to open a business making custom cabinets. You can sell each cabinet for $80. It takes a cabinet-maker approximately 45 minutes to make one cabinet. Each…
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