Tuesday, May 24, 2022

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    Do you keep an eye on Revenue?

    Also called gross sales and settling at the top line, revenue is the final result of the sales of a company. A clear distinction is made between revenue and profit. If revenue is the amount earned then profit is the net and pure amount left after deducting expenses.  An organization has two broad areas of activity and works majorly on operating activity and non-operating activities. Operating activities of a business are pointed towards those activities that deal with the daily operations of the business leading to revenue generation. Apart from this revenue is the key that keeps the business alive and helps in further research, development, expansion, and growth.

    The mission of the firm is maximizing shareholder’s wealth, so earning year on year revenue keeps the position of the business healthy and the stock prices also show positive results. Shareholders are also interested in knowing the revenue position of a firm because the company’s revenue is directly linked with dividend decisions for the shareholders. The position that Revenue holds in the financial statements is in the profit and loss statement.  To measure the performance of a company various ratios are used like the gross profit ratio, net profit ratio, etc is used. Dividend received is a type of revenue too hence it is classified as Dividend Revenue, money received from sales is classified and sales revenue. The source of income for a company is rent received, interest received from investments.

     I think some of the common revenue-generating activities of a manufacturing company are sales, and windfall gains too. Since revenue is the lifeline of a company, revenue earned by a firm is taxable income so there should be laws for subsidiaries and tax reduction laws.

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