The main difference between revenue and profit is that profit takes into account not only receipts, but also expenses of the organization. Therefore, it can also take negative values if the latter exceeds income. Expenses include all amounts spent on the functioning of the enterprise.
Profit is the difference between a firm's income and the costs associated with the acquisition of resources:
Profit = Revenue - Costs (expenses)
Let's consider the main features of these indicators:
Magnitude. Revenue is always either zero or positive. Profit can also be expressed in negative numbers.
Calculation. Revenue is calculated as the total income of the enterprise. To assess the profit, you will also have to determine the amount of expenses.
Real expression. If profit twitter database is always calculated on the fact, that is, on the basis of the financial transactions that took place, then revenue may also have a possible nature - include future receipts. For example, a seller sold a product in installments. At the time of transfer of the goods, the buyer does not transfer money, but they are guaranteed to arrive in the future if the terms of the installment plan are met.
Expression. Revenue has an absolute value. Profit, in turn, can be not only gross, but also net (that is, determined taking into account all mandatory tax and other payments to the budget and off-budget funds).
Thus, revenue and profit cannot be identified; they are two completely different concepts.
A simple example. A seller sells TVs, the average cost of one unit of goods is 5,000 rubles. If 50 TVs were sold in a month, then the revenue will be equal to 250,000 rubles. At the same time, the enterprise must bear the costs of utility bills in the occupied store - 20,000 rubles, pay money to employees - 80,000 rubles. Due to this alone, the profit will decrease by 100,000 and will amount to 150,000 rubles. As you can see, the values of profit and revenue differ quite significantly.
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Key revenue functions
The main purpose of revenue is to reimburse the costs of production/purchase of goods. Financial resources received from the company's activities are credited to its bank accounts. Timely payments guarantee the stability of the enterprise and the maintenance of intensive turnover.
Most often, funds from revenue are spent on the following areas:
Payment for goods to suppliers.
Purchase of material resources for the production process.
Payroll expenses.
Transfers of taxes, contributions to funds.
Increasing production volumes.
Thus, revenue is the main source of funds that support business stability and growth.
Key revenue functions
Interruptions in the revenue stream can lead to a number of problems:
losses;
decrease in profit volume;
accrual of penalties in connection with late payments for the return of borrowed funds.
Failure to fulfill agreements with counterparties.
Failure to pay required payments in full.
A stable income is one of the main goals of the enterprise administration, without which the business cannot function normally. The head of the organization must ensure uninterrupted income. Without regular and timely receipt of funds, the business cannot exist.