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It is the total amount of income generated from the sale of goods (or) services related to the primary operations performed by the company. It is also called Gross sales and is often referred to as “TOP-LINE” because it occupies a great place in income, income statement, or Net income.
It is the whole amount of complete sales of goods and services sold for their related prices. Governing of company total revenue will be helpful in determining the financial well–being, the larger the total revenue the more is money generated by the company. This scenario is useful if we have a lot of expenses that need to be covered. The large total revenue helps in paying for expenses and being profitable for the future.
Net Revenue and Gross Revenue
Net Revenue is the revenue that a company acquired by subtracting expenses such as the cost of the goods that are sold from the revenue.
Gross Revenue is complete contrast theory, it is the company revenue without the deduction is done.
Example: If the company wishes to sell a woolen shirt for $60 the additional charges like shipping, production, storage, will be deducted and the result will be the Net revenue. To make good profits we should maintain company revenue far greater than the expenditure. On the other hand, the total revenue without deductions is the Gross revenue.
In business, they always wish to be in profits and focus on their special abilities to generate revenue by considering their expenditure. These include employee salary, building expenses, office supplements, utility bills management, and others. Due to this the company’s gross revenue could help the investors and lenders to observe the ability to gain profit. the greater the total revenue for the company the greater is the attraction to the investors.
It is mandatory to identify the gross revenue and total revenue even have dissimilarities, the gross revenue takes the sales of the goods and services into consideration whereas the total revenue deals with the income for the company.
How to Work Out Revenue?
This concept is studied well if you are able to understand the concept of total revenue and then the more accurate will be your calculations. The easiest way to calculate the company’s total revenue is by first determining the total number of units of that company sold and the average price per unit traded. The Total revenue is dependent on the two values. To determine the total revenue it multiplies with the number of units traded by the average price for respective goods. Interests and dividends are also added to regulate the total revenue.
The formula for calculating the Total revenue
TOTAL REVENUE = ( average price per services traded) × ( number of services sold )
The result of this equation will be the Total revenue value. The company must be accounting for any changes in the money transfers in the finance department whether it is small or big. This monitoring of change in prices of the unit is important to know the potential to carry out your calculations. But Must need to ensure to include non-operating revenue as Investments and Dividend stocks income into the calculation.
While you are calculating the total revenue we can use various scenarios to help in evaluating the Total revenue calculation. Let us consider an example:
If someone owns a confectionary and he is in planning that whether to continue operating or give up and to do so he started estimating his total revenue. He started noting the sold goods of count 50,000 on an average price of $5 per unit. To calculate the Total revenue he needs to multiply the number of sold goods with the average price per unit in the formula
TOTAL REVENUE = ( total number of goods sold ) × ( average price per good sold )
TOTAL REVENUE = ( 50,000) × ($5)
TOTAL REVENUE = $250000
What to Be Done After Calculating Total Revenue?
After calculating the Total revenue then the comparison of it with the total expenses and can acknowledge if the company is going through enough profits or not which is necessary to operate the company. If this result shows that the expenses are far higher than the Total revenue then it means the company is leading into deficit.
In business, the adjustment of company budget and finances must be in order. Modifying the prices of goods and services is one of the techniques to increase revenue. But make sure the modification of prices is worth increasing revenue ( if prices are high – the customers count decreases and if you lower the prices you face the deficit sooner).
For the goods for which the demand is high, the price can be modified slightly because the slight increase in price does not reduce the customer count instead add on the revenue. On the other, a technique of lowering the prices with the concept of discounts attracts customers which brings high sales to the product but the price modification should be monitored to avoid deficits.