Revenue And Profit Relationship
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Nevertheless their gap of revenue to income illustrates that even for huge companies the two concepts are not easily interchangeable.
Revenue and profit relationship. Sometimes people are confused about the relationship between revenue and profit. Revenue is the amount of money a company receives from sales and other charges to customers. Walmart s profit for the year actually corresponds roughly to their historical revenue vs. Revenue is the income earned by a business over a period of time eg one month.
In a case where a business sells one kind of product or service revenue is the product of the price per unit times the number of units sold. Revenue is the total amount of income generated by the sale of goods or services related to the company s primary operations. The higher the revenue the greater is the profit and vice versa. In a company with a 5 percent net profit every 20 of revenue earns 1 of profit.
As part of the business total revenue profits take into account the difference between income and the amount of money spent to generate that income. This creates a 20 to 1 relationship between revenue and profit. These relationships can be expressed in terms of tables graphs or algebraic equations. These relationships are called the revenue function cost function and profit function.
Total revenue is important because in the effort to grow profits businesses strive to maximize the difference between their total revenues and total costs. The amount of revenue earned depends on two things the number of items sold and their selling price. Take a read of the given article to understand the differences between revenue and profit. Furthermore the company s revenue and expenses are in direct relationship with one another i e.
Revenue profit and income are three terms which sound same to a layman although in business terminology there is a huge difference between them.
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