What is revenue? How important is revenue to an organization?

Question

The income generated from sale of goods or services, or any other use of capital or assets, associated with the main operations of an organization before any costs or expenses are deducted. Revenue is shown usually as the top item in an income (profit and loss) statement from which all charges, costs, and expenses are subtracted to arrive at net income. Also called sales, or (in the UK) turnover.

Deleted user · Answer

Revenue, referred to as sales, is the amount of money a company brings in or earns before any expenses are taken out. From an accounting perspective, revenue typically consists of product and service sales on account or where the customer paid in cash.

Economic Engine

The most basic point about the importance of revenue is that without it, your company cannot earn a profit and stay viable in the long run. You need to collect revenue to justify the fixed and variable expenses you pay just to operate a business. In simplest terms, zero or low revenue leads to an unprofitable business and negative financial results.

Growth

Revenue is often examined more closely than profits when assessing the growth of a business. Investors want to see that a business is able to perpetually generate more sales over time as the company is promoted to an expanding audience. Flat or declining sales growth suggests that the company has stalled and offers limited hope for continued growth. Stagnant companies may produce near-term profit, but they don't attract the interest of new investors.

Credit

To qualify for loans and favorable interest rates on credit accounts, lenders need to see that you are able to generate steady revenue from regular business activities. This, along with assessments of your existing debt structure, help in their analysis. Poor revenue and weak attractiveness to lenders makes it difficult for a company to fund new projects and business activities. This makes it especially challenging to dig your way out of a tough spot.

Confidence

Revenue also has critical psychological implications both internally and externally for your business. Employees want to feel confident in their employer and have a sense of security and stability in their jobs. Strong revenue production offers employees this feeling of comfort. Revenue affords similar comfort to business partners, suppliers, community members and other stakeholders impacted by your business. More confidence from stakeholders makes them more likely to take risks and make decisions to support your company.

Munish Kumar · Answer

Organizations which are for-profit thrive to deliver products / services to generate revenues and profit for the owners. Revenues, costs, profits are the basic components to run a business and show the health of any organization’s income, simply said, profit or loss.

Bottom line, to continue as an ongoing entity, an organization must generate sufficient revenue to cover its costs and earn profit.

kewal kewal · Answer

revenue is the income that a business has from its normal business activities, usually from the sale of goods and services to customers.For non profit organization, annual revenue may be referred to as gross receipts This revenue includes donations from individuals and corporations, support from government agencies, income from activities related to the organization's mission, and income from fundraising activities, membership dues, and financial securities such as stocks, bonds or investments funds.

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What is revenue? How important is revenue to an organization?

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