What is a correct formula to calculate business value?

The fundamental formula for calculating profit, a primary measure of business value, is Revenue minus Expenses. Revenue represents the total income generated from sales of goods or services, while expenses are the costs incurred to generate that revenue. The resulting difference is the profit (or loss). This basic principle is a cornerstone of financial accounting and is used to assess a company's financial performance and health over a period.

A. Dividing revenue by expenses results in a ratio (e.g., revenue per dollar of expense), which is a measure of efficiency, not the absolute profit amount.
B. Adding revenue and expenses together does not produce a meaningful financial metric; it simply aggregates total money flow in and out.
C. Multiplying revenue by expenses has no logical basis in standard financial accounting or business value calculation.

1. Brealey, R. A., Myers, S. C., & Allen, F. (2020). Principles of Corporate Finance (13th ed.). McGraw-Hill Education. Chapter 2, "How to Calculate Present Values," and subsequent chapters on financial statements establish the income statement identity.

2. MIT OpenCourseWare. (2004). 15.511 Financial Accounting, Fall 2004. Session 2: "The Financial Statements". The lecture notes and materials define the Income Statement as reporting revenues and expenses for a period of time, with the result being Net Income (Profit).