Revenue

RECENT NEWS
The Hindu Business Line  Jan 7  Comment 
Revenues will go up after the first year of implementation: Finance Minister
The Economic Times  Jan 6  Comment 
"In the light of that, the design of these options, like some of the previous auctions again, is to maximise revenues for the government."
Forbes  Jan 5  Comment 
VmWare saw a 16% year-over-year growth in net revenues to $4.3 billion through the first three quarters of this year. The company reported a 14% increase in product licenses revenues over the prior year period to $1.8 billion. On the other hand,...
BBC News  Jan 5  Comment 
China's Xiaomi said it more than doubled its revenue in 2014, just a week after it was named the world's most valuable tech start-up.
guardian.co.uk  Dec 30  Comment 
Bwin Party Digital, whose other brands include Foxy Bingo, revises figures after weak gross-win margin in sports betting Bwin Party Digital, the Gibraltar-based company behind online poker room PartyPoker, has warned revenues have been hit by a...
The Hindu Business Line  Dec 23  Comment 
“Since the company’s revenues are derived in multiple currencies, the revenues for the quarter to be reported in dollar would have adverse impact of approximately 210 bps on account of strengthening of dollar against various global currencies.”




 

The term revenue most commonly refers to Net Revenue but it can also be used as Gross Revenue.

Revenue is the total amount of money a company takes in before any expenses.

Net Revenue is the amount of a company's gross revenue plus all negative revenue items. For instance, in the retail industry, gross revenue includes all sales made by a retailer during the accounting period. Net revenue, however, will also exclude the costs associated with items like refunds on returned items, discounts and other negative sales revenue items.

Often times, net revenue can refer to revenue a company receives after it pays its partners. For example, Google (GOOG) arrives at net revenue by subtracting Traffic Acquisition Costs (TACs) from its gross revenue. TACs are comprised of payments made to its Adsense network partners (Google ads displayed on third-party websites are subject to a revenue sharing program), as well as fees related to non-conventional partnerships (such as Google being the first search engine listed in the Mozilla Firefox built-in search toolbar).

This is a subtle difference from Cost of Goods Sold (COGS) - in the case of TACs, these are costs directly related to generating revenue (which is then split between different partners). COGS, on the other hand, refers to overhead and "manufacturing" costs related to the production of goods sold. Analogously, Google's COGS would include expenses incurred in data center operations.

Ratio analysis can be implemented and utilised for the comparative measurement of financial data among several companies of the same industry to facilitate wise investment, as ratios in general involve a process of standardization. Two main indicators-ratios can be used for the evaluation of a company's performance:

  1. Activity ratios: Asset Turnover or Efficiency Ratio = Total Revenue/ Assets

Activity ratios describe the relationship between the company's level of operations(usually defined as sales and the assets needed to sustain the activity). The higher the ratio, the more efficient the company's operations, as relatively fewer assets are required to maintain a given level of operations(sales), or the company expoits its assets in an efficient way maximising its sales. Monitoring the trends in these ratios over time and in comparison to other firms in the industry, can point out potential trouble spots or opportunities that would facilitate investing decisions.

  1. Profit Margins or Return on Sales or Profitability ratio = Profit/Revenue

It is a measure of a company's profitability and it is the relationship between the company's costs and its sales. The profitability ratio indicates the proportion of Revenue that form the company's profit, after deducting any operating and other expenses the company has. It can be also interpreted as the proportion of profits generated from each dollar of sales, showing how profitable a company is.

  1. Return on Assets (ROA) = ( (Net Income/Sales) * (Sales/Assets) )

This ratio is a combination of the two aforementioned ratios that can be summarised in the term Return on Assets, that measures the overall productivity of assets.

Net Revenue versus Total Revenue

Net Revenue (also Revenue, Net Sales, or Sales) is the total revenue or gross revenue minus the costs associated with returned or undelivered goods and commissions. Total Revenue or Gross Revenue on the other hand is simply all positive revenues. This distinction is particularly important for certain sectors like banking which relies heavily on commissions and Retail which can experience frequent returned items.[1]

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