Revenue - Definition & Advantages of Revenue management

Revenue Definition 

Revenue, or sales, is the income your company earns from its business activities. It's usually the majority of a company's income and is calculated by multiplying the number of units sold by their price. 

Operating income is revenue minus operating costs, while non-operating income comes from irregular sources like lawsuit proceeds. Various entities, including governments, nonprofits, and individuals, declare revenue. 

About Revenue 

Revenue is a business's total income from activities and sales. Accounting methods can impact how revenue is calculated, with accrual accounting counting credit sales as revenue. It is the first item on an income statement, and its excess over expenses represents profit. 

Revenue Calculation 

Different businesses use different revenue calculation methods. The basic formula is: (Quantity Sold * Unit Price) - Discounts - Allowances - Returns = Net revenue. 

Business Revenue 

Business revenue primarily comes from selling products or services. Accounting standards dictate when a company recognizes revenue. Revenue management benefits include anticipating customer needs, creating effective pricing strategies, accessing new markets, and improving inter-departmental cooperation. 

Advantages of Revenue Management 

Revenue management helps companies understand customer needs, set competitive prices, reach potential customers, and foster better communication between company departments. 

Types of Business Revenue 

Companies can earn two types of revenue: Operating and Non-Operating. Operating revenue comes from a company's main business activities, such as sales, while non-operating revenue comes from activities not related to the company's main operations.