Revenue

RECENT NEWS
The Economic Times  Dec 7  Comment 
The government's surprise move to scrap Rs 500 and Rs 1,000 notes on November 8, has severely impacted consumption and led to a rash of growth estimate cuts by economists.
newratings.com  Dec 7  Comment 
LONDON (dpa-AFX) - Transport company Stagecoach Group plc (SGC.L) reported Wednesday that its first-half profit before tax declined to 89.5 million pounds from 90.8 million pounds a year ago. Earnings per share were 12.7 pence, slightly down from...
Forbes  Dec 6  Comment 
Recently Twitter acquired startup Yes Inc and appointed its founder Keith Coleman as head of Twitter’s product team. As Twitter struggles to grow users – and is likely to be an acquisition target – stability on the product team will be...
Forbes  Dec 5  Comment 
Major League Baseball hit a grand slam in 2016 that sees the 14th consecutive year of record revenues. Here are the details.
The Hindu Business Line  Dec 2  Comment 
Johnson Lifts, a leading domestic manufacturer of elevators and escalators, is confident of outpacing the industry in growth and plans to increase revenues to ₹2,200 crore by 2019 from about ₹1,400 c...
The Hindu Business Line  Nov 30  Comment 
Brigade Group, with an eye on floating a Real Estate Investment Trust, is to increase its property portfolio and rental revenues.“We expect a slight uptick in rental revenues primarily because the co...
newratings.com  Nov 30  Comment 
NEWCASTLE UPON TYNE (dpa-AFX) - Sage Group plc (SGE.L), a technology company for integrated accounting, payroll and payment systems, reported Wednesday that its fiscal 2016 profit before tax edged down 0.4 percent to 275 million pounds from 276...




 

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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