Why does company proﬁtability decrease in direct proportion to the payroll expenses?
A)Because payroll represents an asset and an income of the business. The higher payroll incomes are, the higher the proﬁtability will be.
B)Because payroll represents an asset and an income of the business. The lower the payroll expenses are, the higher the proﬁtability will be.
C)Because payroll represents a liability and an expense of the business. The higher payroll expenses are, the lower the proﬁtability will be.
D)Because payroll represents a liability and an expense of the business. The lower payroll expenses are, the lower the proﬁtability will be.

Question

Quizplus · Accepted Answer

Payroll is considered an expense for a business, not an asset or income. Therefore, as payroll expenses increase, the company's profitability decreases because more money is being spent on salaries, reducing the overall profit.

Why Does Company Proﬁtability Decrease in Direct Proportion to the Payroll