Definition:

Total Revenue is the total amount of money generated from the sale of goods or services by a company during a specific period.

Examples

If a company sells 100 units of a product at $10 each, the total revenue is $1,000. Another example is a service provider charging $50 per hour for 20 hours of work, resulting in total revenue of $1,000.

Formula:

Total Revenue = Price per Unit x Quantity Sold

How to use the metric:

Total Revenue is used to assess a company's ability to generate sales and is a key indicator of business performance. It helps in evaluating sales trends, setting pricing strategies, and making financial forecasts.

Limitations:

Total Revenue does not account for costs or expenses, so it does not reflect profitability. It can be misleading if used in isolation, as high revenue does not necessarily mean high profit.

Applies to:

Total Revenue applies to all industries where goods or services are sold, including retail, manufacturing, technology, and services.

Doesn't apply to:

Total Revenue is less applicable to non-profit organizations, as their primary focus is not on revenue generation but on fulfilling their mission. It also may not fully apply to industries with complex revenue models, such as those relying heavily on subscriptions or long-term contracts, without additional context.

Summary:

Total Revenue is a fundamental financial metric that measures the total sales of a company. While it is crucial for understanding sales performance, it should be used alongside other financial metrics to gain a comprehensive view of a company's financial health.