Revenue

RECENT NEWS
The Economic Times  7 hrs ago  Comment 
UC&C, IoT and EAI will witness an increase in revenues in the next four years.
Cellular News  8 hrs ago  Comment 
Mobile app users spend 24 percent more on in-app transactions than on upfront app payments, according to an online consumer survey by Gartner. Click here for more.
Forbes  May 27  Comment 
The Islamic State is ramping up taxes and fines on people living in its territory, as it tries to plug gaps in its finances.
newratings.com  May 27  Comment 
LONDON (dpa-AFX) - Bodycote plc (BOY.L), a provider of thermal processing services, Friday reported that its Group revenue for the four months ended April 30 declined 4.9 percent from last year to 192.4 million pounds. At constant exchange rates,...
TechCrunch  May 26  Comment 
 Earlier this week, we reported that the messaging app startup Snapchat was raising more money. Now we have more updates for you. An SEC filing has been made today with information about Snapchat’s latest Series F round, in which it has...
Flightglobal  May 26  Comment 
Sukhoi s civil aircraft division delivered two Superjet 100s in the first quarter, compared with four in the same period last year.
newratings.com  May 26  Comment 
LONDON (dpa-AFX) - Imagination Technologies Group plc (IMG.L) announced the Group now expects revenues and adjusted loss before interest and tax from continuing operations to be materially below market expectations, as a result of one-off...




 

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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