What is 'Revenue'

Revenue
Revenue meaning is the money that is produced by carrying out normal business operations and is calculated by multiplying the average sales price by the number of items sold. It is the total sum of money from which other costs and expenses are subtracted to calculate net income.

What is revenue?
Revenue definition says that it is the total amount of money received from carrying out the business operations such as sales. On the income statement, it is also known as sales. It is the top line figure as it is shown first on the income statement of any company. Revenue is of two types i.e. operating revenue and non-operating revenue.

Understanding revenue
The money that is brought by the business activities of a company is known as revenue. Depending on the methods employed by the company, revenue could be calculated in different ways. The sales of goods and services made on credit to the customer will be included in accrual accounting.

It is essential for the cash flow statement to be checked in order to make an assessment regarding the company’s efficiency in collecting the owed money. However, cash accounting would record sales as revenue only when the payment is received. The receipt is the cash that is paid to a company. There is a possibility of having receipts with no revenue. For e.g., if a customer makes an advance payment for a service that is not rendered yet then this will lead to a receipt without revenue.

Revenue meaning is the top-line figure as it is mentioned at the first position on the income statement of a company. Net income is the bottom figure as it is revenues minus all the expenses. When the revenue is more than the expenses there is a profit. A company tries to increase its profits by increasing the revenue and cutting the expenses.

The revenue and net income of a company are considered individually by the investors so that the health of the business could be determined. If the company is efficient in cost-cutting, then its net income can grow while the revenues stay stagnant. However, such type of situation is not very good for the long-term growth of the company.

Revenue and earnings per share are the two figures that receive the most attention when quarterly earnings are reported by public companies.

Types of revenue
The revenues of a company could be divided as per the divisions that produce them. For e.g., the financing department in a recreational vehicles department may have a distinct source of revenue.

Revenue could be divided into operating and non-operating revenue. Operating revenue meaning is the money generated from the core business activities of a company. Non-operating revenue meaning is the money generated from secondary sources of revenue. The non-operating revenues cannot be predicted very often and they are non-recurring in nature. That is why they are stated as one-time gains. For e.g., Money from selling an asset, and money received from investments are non-operating revenue sources.

If a company deals with manufacturing and selling automobiles, then the revenue generated from the sales of automobiles is its operating revenue. However, if the same company rents a part of its building to another company or individual then the income generated from that rent is its non-operating revenue. Both types of revenues are shown separately in the income statement.

Examples of revenue
If we talk about the government, the money they receive from fines, taxation, sale of securities, rights on minerals and resources, fees, and the sales is their revenue. In the case of non-profit organizations, their gross receipts are their source of revenue. The components of their revenue are donations, from various sources, investments, activities related to fundraising, and membership fees.
If we talk about investments in real estate, their revenue is the money produced by a property via rent or parking charges. The net operating income is calculated by deducting the expenses incurred in operating the property from the income generated from the property.

Calculation of revenue
The formula used to calculate revenue could be simple or complex, it depends on the business. If we want to calculate product sales, then the average price of goods at which they are sold should be multiplied by the number of items sold. For a company that provides services to its customers, the revenue will be calculated by multiplying the value of services by the number of customers.

Revenue = Price of goods * number of goods sold

Or

Revenue = Number of customers * Price of services

Analysis of financial statement
Revenue is an important part of the analysis of financial statements. The measurement of the performance of a company is done by comparing the revenues with the expenses. The result of the analysis is the net income. If a company shows growth in its revenues in a quarter, then analysts see it as a positive performance. However, the net income cannot grow if the company fails to make noteworthy growth in its revenue.

If the revenue of a company is consistently growing along with the net income then it will increase the value of the company as well as its share price.

What is revenue?
Revenue meaning is the total amount of money that is produced by selling the goods or services to the customers. Revenue is shown at the top of the income statement of a company.

What is the difference between revenue and profit?
Revenue definition states it as the total money generated by selling the goods and profit is the amount of money left after deducting all the expenses from the revenue.

Where is revenue shown on the balance sheet?
Revenue is shown under the stockholder’s equity on the balance sheet. It is the earningfrom the sales of goods and services of the company.

Is it possible to have positive revenue but still suffer losses?
A company that generates revenue but has more expenses than the amount of revenue, then it will suffer a loss.

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