The term revenue means the income that a company receives from its normal business activities, usually from the sale of goods and services to the customers. Income which a company earns through dividends, interest or royalties amount paid by other companies is also called as revenue. Revenue may refer to the income earned through a business in general, or it may refer to an amount received during a period of time. Profit or net income is generally calculated by subtracting total expenses from total revenue with in a given period. Revenue is also known as “REVs“.In the case of a non-profit organization, annual revenue is termed as gross receipts.
The sources of revenue for these non-profit organizations are as follows:
- Aid from government organizations
- Donations from individuals and corporations
- Income from activities related to the organization’s mission
- Income from fund generating activities
- Financial investments such as stocks and shares of the companies
- Membership dues
The revenue sources of the government are as follows:
- Gross income from the income taxes paid by individuals and companies,
- Customs and excise duties,
- Other taxes such as sales tax, purchase tax, property tax, wealth tax etc
- From the dividends and interest
While making a financial analysis revenue is always kept on the top line due to its position on the profit and loss A/c at the very top. Revenue is also put at the bottom which denotes the net income i.e., revenues minus expenses.
How is the performance of a company analyzed?
The performance of a company is measured by comparing the company’s previous quarter’s revenue performance. The current quarter’s sales performance can be compared sequentially or on a year-over-year basis. This gives a clear idea on how much a company’s sales are increasing over time. While investing in a company, it is not enough to just look at the revenue performance for the current period. An investor wants to see the growth of his investment or improve over time. Comparison of financial statements of previous quarters will help the investors to have a much better idea of how well the company is functioning.
Revenue is calculated by multiplying the price at which goods or services are sold by the number of units or amount sold. Revenue is broadly classified into two type- Gross revenue and Net revenue. Gross revenue is the amount of income that a company actually earns during a specific period, including all kinds of expenses such as discount allowed, returned goods etc. Revenue in which all the expenses are subtracted is called Net income.
What is the need for a good sales team in an organization?
The sales function has a biggest impact on your revenue growth despite of the current size of your company. For all kind of businesses a good sales team is essential for effective sales and revenue growth. The revenue of your company will increase progressively over time with the help of a reliable sales team. But selecting a good sales team is difficult to recruit and retain. Thus the future of your company relies on your sales team and you have to choose its members with great care.
Recruiting the employees based on industry experience is one of the most common mistakes in filling sales positions. The employee must have left from some other company and you cannot definitely tell that he’ll succeed at your company. Most of the recruitment mistakes could be avoided by observing the candidate’s selling skills during the job interview. Since an interview is basically a sales presentation, it’s easy to test the candidate’s selling skills if you know what to look for. The three essential sales skills which a sales professional have to possess are
a) Prospect Qualifying
At the time of interview a good sales candidate will ask you qualifying questions, such as
What are the challenges which your salespeople face?
What are the most important qualities which you expect in your sales staff?
If he doesn’t ask these types of questions, he is not fit for your job.
b) Pre-Sales Preparation
An excellent candidate will come to the interview prepared by knowing all most every thing about your business. If he doesn’t know anything about your business, then he is not fit for the sales related job.
c) Closing the Sale
A good candidate will ask closing questions to move you towards an appointing decision. In the interview listen for closing questions like:
When would you like me to come back for the next interview?
When do you expect to make a hiring decision?
What are the different types of revenue?
The first line on any income statement is an entry called total revenue. It is the amount of money you had brought in to the business during a time period. It has nothing to do with the profit. The revenue figure is important because a business must bring in money to turn a profit. If a company has less revenue, it’s going to make only less money.
For new companies and new ventures that have yet to make a profit, revenue can serve as a measure of potential profitability in the future. Many companies calculate revenue and sales separately so that they can find out how much was generated by each division. Well defined and separate revenues sources help to analyze the income statement much easier. It allows more accurate predictions on future growth.
Total revenue is a primary method to calculate economic profit. Total revenue is the total money received from the sale of any given quantity of output.
Total Revenue = Price X Quantity
For calculating revenue for a perfectly competitive firm, which fixes a single unchanging price for all output sold, the calculation is relatively easy. For other types of firms, that charge different prices to different buyers for different quantities, the calculation becomes much more complex. Two other revenue measures which are directly related to total revenue are average revenue and marginal revenue. Marginal Revenue (MR) is the change in total revenue resulting from the sale of additional unit of the commodity. It is the additional revenue earned by the company through the sale of an additional unit. Marginal revenue is calculated by dividing change in total revenue by change in quantity.
Average revenue is the revenue earned per unit of output. It is nothing but the price of one unit of output. Average revenue is calculated by dividing Total Revenue with number of quantities sold.
Average Revenue (AR) = Total Revenue (TR)/Quantity Sold (Q)
Total revenue is often represented as a total revenue curve. Total revenue is important to the analysis of a firm’s short-run production decision. A firm tries to increase the quantity of output that maximizes profit, which is the difference between total revenue and total cost.
Total revenue can be represented in the form of a table or a curve. For a perfectly competitive firm, the total revenue curve is a straight line that emerges from the origin. For a monopoly, oligopoly, or monopolistically competitive firm, the total revenue curve is a “hump-shaped” curve, which increases and reaches at a peak and then starts declining. These are the different factors those involve revenue growth of your firm.
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