# Profit Formula

Finance / July 16, 2018 / Hattie Munoz

Economic cost is the combination of gains and losses of any goods that have a value attached to them by any one individual. Economic cost is used mainly by economists as means to compare the prudence of one course of action with that of another. The goods to be taken into consideration are e.g. money, time and resources.

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Debt to Total Asset Ratio is a ratio to determine the extent of leverage in a company. This ratio makes it easy to compare the levels of leverage in different companies. Debt to Total Asset Ratio is a very important ratio in the ratio analysis. The article clarifies how we can analyze this ratio and interpret it to use it for making important financial decisions.

Economic cost which is also known as opportunity cost is the value you give up when you choose one economic activity over the next best economic activity. Such economic activities might include buying goods or services or staring a business. You can calculate the economic cost by finding the difference between the chosen economic activity and the alternative economic activity.

It is important to note that fixed costs are not always the same. Like the price of anything, they can change - sometimes unpredictably and sometimes on a regular schedule, but they do so based on some other factor, not the level of production. For example, if a lease contract is being renegotiated and a $10,000 per month lease payment is increased to $10,500 per month, fixed costs have risen, but not because of production levels.

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