What does revenue mean?
Income from activities that are ordinary for a particular business. Most of the businesses such as manufacturing or anyone who sells goods, revenue comes from the sale of goods. Service businesses such as law firms, receive most of their revenue from services that are rendered. Lending businesses like banks, receive most of their revenue from fees and interests that are generated by lending assets to organizations or individuals.
Revenues from the business’s primary activities are reported as sales, sales revenue or net sales. This will include product returns and any form of discounts that arise from the early payment of invoices. Most businesses will also receive other types of income that come from fixed deposits. It may be included in revenue but it will not be present in net sales.
Other form of income arises when the business uses other means to generate revenue such as the lease of one of their buildings.
Financial statement analysis of revenue.
Revenue is a crucial component of the financial statement. A company’s performance is measured by comparing their revenues and expenses. This equation will bring forth the net income amount. If a company’s net revenue is climbing each month or year, it will be seen as a positive growth.
This income is used as an indication of the quality of earnings. There are several financial ratios that are attached to it, such as the gross margin and profit margin. Companies also use the income statement method to determine their bad debt expense for the next month.
A company may have negative earnings but the revenue with almost always be positive.