Question

How to calculate gross income based on cost of cultivation?

Answer 1

Answer:

Explanation:

Let your net returns be N = G-E where G is gross returns and E is expenditure. The ratio N/E = (G/E)-1. So you can use either N/E or G/E because they are closely related. But your decision rule will be different. If you use G/E then the project passes the test of acceptability if G/E > 1. If you use N/E then the project passes the acceptability test if N/E > 0. In either case you are using the rule that a project passes the acceptability test if G-E>0. One final point: if you are using gross returns to measure benefits and expenditure to measure costs, it doesn't sound like you are really doing cost-benefit analysis. It's a profitability analysis.

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