Definition:

Revenue is the total amount of money generated by the sale of goods or services related to the company's primary operations. It is often referred to as the "top line" because it sits at the top of the income statement.

Examples

Examples of revenue include sales revenue from products sold, service revenue from services rendered, and rental income from property leasing.

Formula:

Revenue = Quantity Sold x Price per Unit

How to use the metric:

Revenue is used to assess a company's financial performance and growth potential. It provides insight into the effectiveness of sales strategies and market demand for the company's products or services.

Limitations:

Revenue does not account for expenses, so it does not provide a complete picture of profitability. It can be misleading if costs are high or if there are significant returns or discounts.

Applies to:

Revenue applies to all industries, as it is a fundamental metric for assessing business performance across sectors such as retail, manufacturing, technology, and services.

Doesn't apply to:

Revenue is less applicable to non-profit organizations, where the focus is on donations and grants rather than sales. However, it can still be relevant for any sales activities they engage in.

Summary:

Revenue is a crucial financial metric representing the total income from sales of goods or services. While it is essential for evaluating business performance, it must be considered alongside other metrics to understand profitability and financial health fully.