Profit is all the material assets that were received as a result of the activities of the enterprise, without taking into account expenses for the same time.
Gross profit in accounting documents is calculated by subtracting the cost of goods from revenue. The calculation per unit of goods is determined by subtracting the cost price from the price. Although the price includes tax elements.
Net profit is obtained by deducting absolutely all expenses: cost of goods, costs of employee salaries, repairs and purchase of equipment, utility bills, taxes, rent of premises, written-off goods, fines, etc.
Revenue is all the financial resources that come to the account of an enterprise as a result of its activities. This does not include income due to appreciation valuable papers and other assets of the enterprise. Only specific funds. Plus electronic money received as payment from bank cards.
Sales revenue is income from the sale of goods or provision of services. which are the main activities of the enterprise. This does not include money received through investments or other financial activities.
Examples
1) Alexey bought a carton of cigarettes in a wholesale store for 600 rubles, then sold the cigarettes at retail to his friends. As a result of the sale, he received 750 rubles.
750-600=150 rubles – Alexey’s gross profit.
But in order to buy cigarettes, Alexey rode in a minibus to the outskirts of the city. A one-way minibus ticket costs 30 rubles.
750-600-30-30=90 rubles – net profit from Alexey’s financial enterprise.
2) The metallurgical plant produces metal products and sells them. Everything that the plant receives for the sale of its products is sales revenue. But the company also does other things: it invests profits in the development of other promising enterprises, and also makes bank deposits and issues loans at interest.
The cash received from all these transactions plus sales proceeds will constitute the complete concept of revenue for a certain period.
How is one connected to the other?
What is the ratio of net profit to revenue? As has already been said, The formula for calculating profit is: revenue – costs = profit. Subtraction example. Rule of mathematics: the minuend (revenue) is always greater than the difference (profit). Hence the rule of business: revenue can only be greater than or equal to profit. By the way, these concepts are very rarely equal; there are always certain costs.
Attention! A situation where profit exceeds revenue is impossible.
Here's an example:
Tatyana bought dresses worth 10,000 rubles in the city, then went to the village and sold them. In the amount of 17,000 rubles. She paid 400 rubles for round-trip tickets. I paid 150 rubles for a place at the village market. We get:
- Revenue – 17,000 rubles.
- Profit – 17000-10000=7000 rubles.
- Expenses – 400+150=550 rubles.
- Net profit – 7000-550=6450 rubles.
Let’s evaluate the indicators: with revenue of 17,000, net profit was only 6,450 rubles.
This is just a primitive example that clearly shows the relationship between these indicators. Tatyana could have sewed these dresses herself, but even then she would have spent money on fabric and accessories.
Now let’s look at an example of an equal ratio of indicators:
Vasya gives massages to visiting clients at home. He doesn’t resell anything and doesn’t spend money on trips. His revenue is equal to his profit. Ideally, the same scheme applies to hired workers: their salary is their profit, and revenue all rolled into one.
What is the difference between the concepts?
The main difference is that revenue is either zero or some amount. It cannot be that we will receive negative revenue. It either exists or it doesn’t. No other option is possible.
Profit is a different story. Any business at the initial stage is in the red, sometimes this can happen to successful large organizations. That is, expenses exceed the amount of funds received. There is even such a concept as “breaking even”, i.e. reach a level where you can fully cover all costs with your income. As soon as revenue begins to exceed the sum of all costs, profit becomes a positive number.
Net revenue differs from normal revenue. It is the difference between simple revenue and taxes invested in the cost of goods. According to the law, the price of each product includes a part that initially belongs to the state. The result is revenue that belongs only to the enterprise.
In order to better imagine the difference between profit and revenue, consider a couple of illustrative examples:
1) Excise tax on the sale of cigarettes is a type of taxation. Its amount is invested in the cost of a pack of cigarettes. The excise tax will increase, the price will rise. Net proceeds from the sale of cigarettes are the money received excluding excise tax.
The difference between net profit and net revenue is the sum of all costs and the cost of goods. Subtracting profit from revenue we get expenses. In the subtraction example, the answer is called the difference, that is, the difference. Here is the difference between these concepts.
2) Valery Petrovich is the owner of a car repair shop. Within a month, a certain amount of money fell into the cash register of his enterprise. This month he paid for utilities, gave workers wages, bought Consumables, launched advertising and paid a bunch of other small expenses.
All that was left of the money received from the cash register became the net profit of Valery Petrovich’s auto repair shop. And the difference between these two concepts lies in the funds that he had to spend this month to maintain the operation of his enterprise.
How to calculate?
Here it is necessary to explain the calculation mechanism. All indicators are calculated for a certain period. It is clear that our Valery Petrovich will not wait until the end of the month to pay expenses. He will do this from other sources: personal savings, revenue from last month, or simply borrow. No matter how he does it, the calculation will consist of the expenses and revenue of one period at the end of it.
Conclusion
The easiest way to understand the difference between these terms is to imagine similar fictitious situations in your head. It is not necessary to make them believable, the main thing is to grasp the structure. All concepts that relate to business are interdependent, and one can be calculated from the other.
To gain an understanding of the big picture, you need to start by understanding the components. I wish that your revenue will always be much greater than your expenses, giving you the desired profit!
The company's revenue is called cash injections or receipts in the format potential benefits from product sales, labor activity or services. A company's trading earnings are an overall measure of a company's monetary achievements. It is important to remember that revenue is significantly different from profit, but many people constantly confuse these two concepts.
In this article you will read:
- What is company revenue
- Why is it constantly confused with profit?
- How to find out a company's revenue
- What can be judged by a company's revenue?
- How to analyze a company's revenue and forecast it
- What ways can you increase your company's revenue?
What is a company's revenue and how does it differ from income?
Company revenue significantly different from the firm's net income. These concepts can be easily confused, resulting in miscalculation of work planning and remaining bankrupt. To prevent this, you need to understand these concepts.
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The company's revenue is the result of the sale of manufactured goods, services provided, or labor activities performed. It is affected by cash receipts received as payment for goods (barter) and accounts receivable. The company's revenue is also the monetary result of investments in the sale of securities and assets. The main definition of revenue is the total income, the receipt of which is influenced by the main activities of the company.
Sales revenue is the finance that a company receives or can receive for goods that have been shipped to customers. A company's sales revenue can be general (gross) or net. A company's gross revenue is the price of products sold. The net figure is the gross figure, from which taxes on the company's revenue, discounts, and the cost of products returned by consumers are subtracted.
Gross revenue is the total financial income. Such revenue is equal to the sum of the infusion of finance from the sale of goods, the receipt of income, the receipt of which is possible due to non-realized operations, and property units of another plan.
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The purpose of obtaining revenue. Any enterprise can reimburse the funds spent on the production of goods and receive revenue. Thanks to its timely receipt, the company can develop steadily. In this case, money circulation is continuous, and financial activities company is carried out without interruption. The proceeds are used to pay bills, fuel, energy, and pay off suppliers. Pay wages, compensation for wear and tear on fixed assets becomes possible thanks to it. If a company's revenue does not arrive on time, the company's operations become unstable. This leads to a decrease in income, violation of contract terms and fines.
Revenue forecasting is a process in which the probable and possible achievements of financial resources during planned events are determined to ensure a specific forecast reaction of the market to the proposed product and ensure revenue.
Total revenue is formed from several components.
Income from the main direction of the work, coming from the sale of goods or the provision of services.
Investment income, manifested as a financial result achieved through non-current assets and the sale of equity securities.
Income from financial work enterprises.
Methods for calculating revenue. In the field of commercial accounting, two methods are used to predict the volume of revenue:
revenue using the cash method - calculation based on the actual receipt of funds into the company's account. The company's revenue is the funds that are in the account or cash register of the company, or products received through barter as payment for fulfilled obligations.
Accrual revenue is when accrual is made when customers have a series of obligations to pay for the company's services or goods. The calculation is made even if the funds do not reach the company’s account. Typically, a company's trading revenue is accrued when a shipment is made to a customer or certain services are provided. It is important to know in which account the company's revenue is reflected.
Additional Information. Company size by revenue
The Russian government issued a decree based on which the annual income limits doubled from July 25, 2015. The resolution refers to the classification of any economic entity as representatives of the small and medium-sized business sector. According to the designated criteria, any company can be classified as a small, medium or micro-sphere of business, and this makes it possible to obtain government support when conducting campaigns that support small forms of entrepreneurship.
So, a micro-enterprise is a company with a turnover of up to 120 million rubles with a staff of no more than 15 people. Small businesses have a turnover of up to 800 million rubles with a staff of up to one hundred people. The turnover of a medium-sized enterprise does not exceed 2 billion rubles, and the number of employees is no more than 250 people.
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In 2008, the Russian government for the first time announced criteria for classifying companies as small and medium-sized businesses based on income level. At the same time, a resolution was adopted defining that a micro-enterprise is a company whose annual revenue (without taxes) is up to 60 million rubles, a small business is a company with revenue of no more than 400 million rubles, and a medium business is up to 1 billion rubles.
Now the level of acceptable income has doubled. Many legislative provisions issued to support small businesses (this includes, for example, a document limiting inspections at enterprises government agencies) the emphasis is on company size by revenue (2015). In addition, on the basis of the law “On the Development of Small and Medium Enterprises”, the development and implementation of federal programs for the development of small and medium-sized business companies, councils were created to support business, and part of the R&D in this industry was financed.
The law talks about the framework criteria by which companies can be classified as small and medium-sized. The first indicator is the number of employees in the company. In 2008, companies with no more than 15 employees began to be classified as “micro” companies. Small firms have about 16-100 employees, medium-sized ones - no more than 250. Thanks to such a formal framework, fly-by-night companies have the opportunity to classify themselves as one of the groups. Subsequently, a criterion was established at the legislative level regarding the company’s total revenue, taking into account the current state of affairs and economic problems. The law establishes that when enterprises are divided into groups, preference in a controversial situation is given to the larger indicator. For example, if a company’s revenue is 2 billion rubles, and the number of people working in it is 10, the company is considered medium-sized.
How to find out a company's revenue
After the company has carried out its activities for a year, the results of its work become relevant. It is determined how much the organization incurred in expenses and what its income turned out to be. Based on these indicators, we can talk about the success of the enterprise, whether it is unprofitable or profitable.
How to find out a company's revenue? In accordance with accounting laws, the balance sheet is a snapshot of data on the activities of an enterprise on a specific reporting day. It is pointless to look for a line that would say about the company’s total revenue - there is none. To reflect the company's revenue in 2015 or earlier, an accounting report is used, which highlights the financial results.
There is a connection between revenue and balance sheet, although it is not visible at first glance. You can follow it by looking at examples of certain lines in the balance sheet.
Revenue and 1st section of the balance sheet
The connection between the company's total revenue and almost all lines in the first section of the balance sheet is obvious. Thus, with a sharp decrease in the residual value of main finances or intangible reserves in the report, we can talk about the sale of part of them. Here it is permissible to assume possible appearance the organization has income from their sale. When information appears on the balance sheets about profitable investments in tangible assets, you can expect profit from a new type of work (an example is the rental of valuables).
The first section of the balance sheet contains lines that, at first glance, have no relation to the company’s revenue. Here we can talk, for example, about financial investments. But this opinion is wrong. With stable development and a desire to develop, the company will do everything to achieve an even higher level of income. One of these methods is investing funds. Of course, if we consider purchasing securities and making contributions to the capital of another company, this can be done using borrowed funds. But the main source in enterprises that are developing steadily is income, which is formed mainly from revenue.
Revenue and current assets
Data on current assets for the reporting period are contained in the second section of the balance sheet. The section allows you to find out how the company’s revenue is related to current assets by looking at the line where it talks about Money ah and equivalents. The company's revenues are at current account and at the cash register.
If this line contains information about a large balance for the reporting period, you can determine how managers know how to manage and work with the amount of revenue. For example, the profit of an enterprise is so great that the company cannot fully take care of the circulation of funds (purchase assets, make profitable deposits). In the case of a low balance, one can draw conclusions both about the successful activities of finance specialists who know how to apply the received proceeds in a timely manner, and about the lack of money in the organization.
Important! When a large volume of revenue arrives at the cash desk, the company may encounter a situation where the limit is exceeded. This is stated in the Directive of the Bank of Russia (03/11/2014) No. 3210 - U. Consequences for such actions may occur in accordance with Article 15.1 of the Code of Administrative Offenses of the Russian Federation.
You can learn more about the relationship between revenue and this item on the balance sheet by studying accounting, which describes the movement of finances. However, based on the information on the balance sheet, certain conclusions can be drawn.
3rd section of balance sheet and revenue
The connection between this section and information on the company’s revenue is obvious, which cannot be said about other sections and lines in the balance sheet. The report, which describes the financial results, allows you to find out about the amount of net income received by the enterprise, include the composition of uncertain profit and enter it in the third section.
The company's revenue and the specified section are correlated in another context. You cannot receive a large income, be a rapidly developing company, form reserves and increase capital if there is no profit. It is also impossible to make a profit if the company does not receive trading revenue.
In some situations, firms do not have much profit. Moreover, the main activity can cause only losses, but at the same time the size of the company in terms of revenue is quite significant. Such cases are possible when firms carry out unprofitable, but socially significant orders, but third-party income helps them receive large sums revenue. In this situation, the company's revenue and balance sheet are certainly not related to each other.
Revenue and debt
Sections in the balance sheet No. 4 and 5 contain information on borrowed funds. The company's trading revenue correlates poorly with this information, but it is present.
Borrowing money for companies is burdensome and sometimes dangerous, since there is a risk of not repaying the debt and going bankrupt. The process is cumbersome due to the fact that it is necessary to pay interest on the loan. At the same time, paying for current expenses is becoming increasingly difficult, since there is not enough finance. Paying for raw materials, heating, electricity, wages - all this requires expenses. If there is no money, there is a threat of termination production process. As a result, supplies of finished goods to consumers are intermittent. If there is no sales, there is no company revenue.
Important! IN this moment Firms do not need to set an interest rate on borrowed funds to calculate taxes on the company's income (in accordance with Federal law dated December 28, 2013 No. 420 - Federal Law). This paragraph is relevant for all financial obligations, with the exception of those arising as a result of a controlled transaction.
The balance sheet does not contain lines reflecting revenue, but there is information about liabilities and assets there. When these indicators change, we can talk about an increase or decrease in the company’s revenue, and in the opposite direction. This suggests that data on the company’s revenue and balance sheet are related.
How to analyze and forecast company revenue
The company's revenue is the main source of cash injections into the organization. The regularity of cash receipts affects the stable operation of the company's activities and turnover indicators. In this regard, it is necessary to timely analyze the revenue indicators from the company’s sales of goods/services and draw up plans for its receipt. To analyze and forecast the company's revenue and cost, you should pay attention to the difference between the goods sold and the volume in which they were produced. You should also not forget about factors that can influence an increase in income.
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If a company has had low income for a certain amount of time, it may be worth talking about releasing goods of poor quality or product units that are not in demand by the consumer. A company, in an effort to improve the state of affairs, can analyze and forecast the company's revenue and cost and, based on its indicators, increase the level of quality of goods, reduce the rate of production (if we consider overproduction), change the product line or expand it.
The following circumstances may reduce the company's revenue:
- disruptions in the activities of the enterprise that occurred due to various reasons;
- incorrect pricing;
- erroneous marketing moves;
- violation of clauses in contracts with consumers, persons supplying or transporting products;
- change of legislative norms, the emergence of inflation.
Some of the above circumstances can be influenced by the companies themselves, but other factors do not depend on them. With a stable analysis of the company's total revenue, you can see useful information. Based on data from the analysis and forecasting of the company's revenue and cost, organizations often change suppliers and carriers. The more professional the partnerships are built, the more better quality activities. This factor influences the work no less than the characteristics of the goods produced or services provided.
When planning revenue, it is necessary to make the following calculations:
1. A pessimistic forecast, where the worst-case scenario of future circumstances applies.
2. An optimistic forecast that talks about the state of affairs under ideal conditions.
3. Real calculation is something between pessimistic and optimistic forecasts. This should be used as a guide.
The basis of calculations, no matter what, is the company’s total revenue received from the sale of goods. Here is a formula to calculate profit:
РхЦ=В, where
P in in this case acts as products sold (measurement - units, quantitative expression), work performed, services provided.
P is the price for individual units (products, services).
B – the amount of revenue received.
When carrying out calculations, analysis and forecasting of the company's revenue and cost, enterprises can also think about building development prospects.
1) Attract premium segment customers. For example, it is not so difficult to make ABC of Taste consumers customers of Pyaterochka. It is enough to demonstrate that there is no particular difference in the assortment in the stores. When packaging products in bags that ABC of Taste uses, you can play on consumer associations. Customers will perceive the products as the same as before. At the same time, of course, the buyer will not be able to purchase certain food brands.
2) Develop areas that provide at least small income. This recommendation was adopted by airlines that began to engage in charter flights. Such directions cannot be called profitable. However, if passengers become uninterested in scheduled flights during certain periods, companies have the opportunity to make a profit and reduce the risk in terms of aircraft loading (in this case, the tour operator is at risk).
3) Cut down ineffective areas wisely. Now it is advisable to invest in well-developed segments that have a stable market share, their own target audience, in short, where you need to get ahead of your competitor quite a bit. At the same time, it is necessary to monitor competing organizations. If one or more competitors leave, you will only benefit from this. Don't give up on your plans earlier than your competitors.
4) Don't change prices. In order to retain customers, prices are sometimes dumped, as a result of which your products may cost a little more than those of competitors. However, remember that by using this method, the company operates at a loss. Let’s assume that the airline managed to sell one hundred tickets for 2 thousand rubles. The company believes that if tickets are sold at a price of 1,500 rubles, 150 tickets can be sold. At the moment there are no such situations, since the market environment is quite small. As a result, the company manages to sell one hundred tickets at a price of 1,500 rubles. The organization receives less income for the same expenses, since the number of passengers does not affect the price of the flight. The result is a loss.
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Lowering prices is a bad way to retain consumers. Wait until the crisis subsides, and customers will come again. At the moment, all firms are united by a common goal - to maintain the number of consumers at existing prices for services. It is not the old clients that should be retained, but the same number of consumers. If older customers stop using the service because of the high cost, they clear the way for those who find the price reasonable. Winning in a crisis environment is always on the side of the strongest. When offering expensive products, take care of their highest quality. If it is a cheap product, then, as a rule, the level of service is lower. Selling ten-ruble yoghurts in Azbuka Vkusa, similarly to Pyaterochka, is an impossible task, since logistics in Azbuka Vkusa are initially more expensive than the cost of the product.
5) Offer Additional services for a fee. Almost all companies believe that it is necessary to develop additional services. However, some companies include them in the price of products, while others do not. It may be worth thinking about developing not only standard, but also new services that no company currently offers. This could be calling a taxi driver, renting a car, or additional insurance. There are no additional costs. You will provide services only upon payment.
Information about the author and company
Alexey Gisak, managing partner and co-owner of the Vocker group of companies, Moscow. GC "Vokker". Field of activity: public catering (noodle chain). Territory: head office and 14 restaurants in Moscow, one restaurant in Yekaterinburg. Number of staff: 400. Average bill: approximately 430 rubles. Cooking time: 120 sec.
Alexey Gisak, managing partner and co-owner of the Vocker group of companies, Moscow. GC "Vokker". Field of activity: public catering (noodle chain). Territory: head office and 14 restaurants in Moscow, one restaurant in Yekaterinburg. Number of personnel: 400
Annual turnover: more than 500 million rubles. Average bill: approximately 430 rubles. Cooking time: 120 sec.
For many people, it remains not entirely clear what enterprise profit and income are. And if you delve deeper into this topic, many clarifying terms come up: gross profit, EBITDA, net profit.
It turns out that economists, accountants and statistical officials, when publishing their indicators, have in mind strictly defined meanings of each term. Such definitions are given in state legislative documents, and knowledge of them is mandatory for all reporting employees. But since the area of profitability and profitability is of interest to many non-professionals, it would be useful to understand the essence of the concepts being discussed.
What is revenue?
The most easily understood concept in modern economics is revenue. Indeed, revenue is funds received by an organization or private entrepreneur in payment for a product or service. It seems that everything is simple.
However, revenue has its own characteristics at the moment it is recognized as such. In everyday life, revenue is understood as real money at the time the seller receives it - revenue is determined by payment. There is a name for this case: the cash method of revenue accounting. That is, the company can give its goods to the buyer with deferred payment, and until the money arrives in the bank account, there will be no revenue. back side cash method - the need to consider all advances received as revenue.
Another, more common method of accounting for revenue is usually used in large companies. This is an accrual method of accounting for revenue. That is, revenue is recognized as such when the goods are transferred to the buyer or at the time of signing the act of services rendered, regardless of the actual date of receipt of money. In this case, advances for supplies are not considered revenue.
Revenue can be gross or net. Gross revenue is the entire amount of money received for a product or service. Or full price exchange agreement, if we are talking about barter transactions. This indicator is of little interest, since there are mandatory taxes and excise taxes, as well as duties, which are directly included in the price of the product (service). This means that they must be removed from the buyer's payment and returned to the state.
This is how another indicator appears - net revenue. It characterizes the activities of the enterprise, regardless of the composition and amount of taxes and excise taxes included in the sales price. Net revenue is always reported in one of the main accounting reporting documents - the income statement.
What is income?
Income is the amount by which the capital of an enterprise grows. How can he even grow? One way is through the making of contributions by the owners of the enterprise, and the other is through its activities. After all, any enterprise is created for the sole purpose of generating income.
The classification of income and expenses is so important that statesmen have devoted many documents to it. The most significant of them are the Tax Code and PBU. The Regulations on Accounting “Income of Organizations” provide complete explanations of the methods of formation and types of income of an enterprise.
Without delving into the intricacies of these monumental works, it can be noted that income from core activities is net sales revenue. Income can be equal to revenue, but this is a rare case. Typically, an enterprise carries out a variety of activities, including different types income.
In addition to income from direct statutory activities, an enterprise can receive other income. For example, interest on keeping your own money on deposit or penalties collected from partners. These incomes are classified as other income, but they also participate in the formation of the enterprise’s profit.
What is gross profit?
By summing up the income received from various types of activities and reducing them by the costs associated with them, a gross profit is obtained. For example, the main activity of selling goods or services forms income, and the cost of these goods or services forms expense. The difference between them will give the gross profit for the main activity. The same approach applies to determining gross profit from other activities.
It is interesting that in trade, gross profit for core activities is the difference between the selling price of goods and their cost. But for industry, this indicator is calculated more complexly; the cost includes many cost elements that are taken into account according to special rules.
Gross profit is a favorite metric for comparing the performance of different businesses. In addition, it is possible to determine the gross profit from various activities within one enterprise and show the effectiveness of the production of different goods. Gross profit is very popular with bankers when calculating the creditworthiness of a company. However, for the owners of the enterprise, another indicator is more important - net profit.
What is net profit?
The result of all operations in the activities of an enterprise for a certain period is expressed by net profit. It is obtained by reducing gross profit by the amount of all costs paid from it. Such costs are classified according to the rules specified in the laws. IN general case, this is income tax, fines that the company must pay, loan interest and other operating expenses.
Gross profit minus these expenses creates the base from which dividends are calculated to the owners (shareholders) of the enterprise.
It is net profit that shows the final effect of the enterprise, which is displayed in the main accounting document - the balance sheet.
Other types of profit - EBIT and EBITDA
Importance government regulation when generating net profit, it is difficult to overestimate. In essence, the state sets the rules of the game, regulating those costs for which an enterprise has the right to reduce its profit until a tax is charged on it. These costs, as well as the amount of income tax, may differ by state or even by region within each country.
If an analysis of the activities of enterprises operating in different countries or when different systems taxation, then no conclusions can be drawn based on net profit. Therefore, for comparison, other types of profit are used: gross, or specially purified. Refined earnings include EBIT (earnings before interest, taxes, and taxes) and EBITDA (earnings before depreciation, taxes, and interest).
The first acquaintance with the main economic categories of the enterprise's work took place. Now you know what profit and income are and how revenue differs from them.
Many people still do not have an accurate understanding of what constitutes a company's income and profit. If you begin a detailed study of this topic, a large number of additional concepts arise that are clarifying. These include net profit, gross profit, EBITDA. In fact, when certain indicators are reflected by employees of statistical bodies, accountants and economists, then each specialist means by any of these terms exact value. These values are specified in the country’s legislative documents, so every person working with reporting needs to understand them. But the area of income and profit is also of interest to non-professionals, for whom knowledge of the essence of these terms will not be superfluous.
The easiest way to understand the concept of revenue. Revenue is those funds that were received by a company or person in the form of payment for services performed or goods provided. And it's easy to understand.
However, revenue has distinct properties. Everyday life By revenue, we mean the money that the seller receives in the form of payment. This refers to the cash method of accounting for revenue. If the company transfers the goods to the client, allowing him to pay later (deferred payment), then before the client's money reaches the owner of the goods, there is no revenue yet.
Large enterprises use another method to take into account revenue - take it into account according to accruals. With this method, even those funds that have not yet been received by the seller can be called revenue if an act of provision of services has been signed.
There are also net revenue and gross revenue. Gross revenue is the entire amount of money that was received for the provision of a service or provision of goods. This type of revenue is almost of no interest. This is due to the existence of duties, excises and taxes that are included in the price. They will need to be returned to the state.
For this reason, the concept of net revenue was formed. This type of revenue is a direct characteristic of the company’s work, regardless of what payments to the state are contained in the prices of goods and services. It is net revenue that accountants always indicate when making a company profit and loss report.
Revenue calculation formula: B=P*C, where
B – revenue;
P – number of products sold;
P is the selling price of each product.
What is income and how to calculate it using the formula?
Income is the amount that comes to the capital of the company. How can he arrive? Firstly, due to contributions from the company's owners, and secondly, due to the effective operation of the enterprise. After all, any company is created in order to generate income.
It is very important to classify costs and income received, therefore there are many documents regulating this activity. The most important of these documents are the Tax Code, as well as the Accounting Regulations, which provide explanations for any income and how they are generated in the company.
In short, income from your main job is net income. A company's income is sometimes equal to revenue, however, in most cases, the company is engaged in a variety of activities, each of which generates its own type of income.
In addition to income from statutory types of work, the company may have other areas of income generation. These may be fines collected from partners in case of violation of contracts or interest on the deposit. Such income is included among others, but it also helps form the company’s profit.
Calculation of gross income formula: D = Z x Q, where:
D – gross income;
Z – selling price;
Q – number of units of goods.
Gross profit - what is it? Calculation formula.
The income of the enterprise should be summed up, the costs incurred should be subtracted from them, and thus the gross profit will be determined. For example, income comes from the sale of goods, and expenses are the costs of their creation, or their cost. Having found the difference between the first and second, it will be possible to find out what the amount of gross profit is from the type of activity of the company, which is the main one. The amount of gross profit for other types of activities is determined in the same way.
It is noteworthy that in the field of trade, gross profit is determined by finding the difference between the price and cost of the product. In area industrial production It is more difficult to calculate this indicator, since many costs are included in the cost.
The effectiveness of several enterprises is most often compared precisely by their gross profit. You can also keep track of which type of activity in one company is the most effective, thanks to the gross profit indicators for each of the types of activities performed by the company. The creditworthiness of enterprises is calculated by bank employees also according to this criterion. But the owners of the company themselves are more interested in the net profit indicator.
Gross profit calculation formula: VP = BH - I (C + OZ), where:
VP - Gross profit
ND - Net sales income
I − Costs
C + OZ - Cost + Operating costs
Net profit, concept and calculation formula.
All actions and operations of the company in a certain period of time are reflected in the net profit indicator. It is calculated by subtracting from the gross profit the costs that must be incurred by law. These costs include taxes, penalties and other expenses.
Gross profit, after the above costs have been deducted, becomes the basis on which dividends are calculated to the owners of the company.
The net profit value demonstrates the company's performance, which should be reported on the balance sheet.
Net profit calculation formula : PP = FP + VP + OP – CH, where:
PE – net profit,
FP – financial profit,
VP – gross profit,
OP – operating profit,
CH – amount of taxes.
Video on the topic: ebitda indicator
What is EBIT and EBITDA?
The activity of the state in regulating the formation of net profit is very important. Exactly on state level enterprise costs are regulated. They may vary depending on the country in which the enterprise is located, and even on the region.
When performing analytical work regarding the activities of a company, one cannot draw conclusions based on the value of net profit. Because of this, the comparison process takes into account the criteria of gross profit and cleared profit. There are two types of cleared profit: EBIT(which exists before taxes and interest) and EBITDA(which does not take into account taxes, interest and depreciation).
Ebitda calculation formula: EBITDA = Revenues – (Expenses – Taxes – Interest on liabilities – Depreciation charges), where
Income – revenue from core activities (TR– total revenue),
expenses – total cost (TC – total cost) excluding depreciation.
Ebit calculation formula: EBIT = Net profit + interest on loans and borrowings + Taxes payable
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