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Revenue Analysis

This document discusses revenue analysis and defines key revenue concepts. It provides examples of how companies can increase revenues through pricing strategies like raising prices, adding services, or introducing new products. It also defines types of revenues including total revenue, average revenue, and marginal revenue. Formulas are given for calculating each type. The purpose of revenue analysis is to help companies determine how to significantly grow their revenues and profits.

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Mirabel Vidal
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392 views

Revenue Analysis

This document discusses revenue analysis and defines key revenue concepts. It provides examples of how companies can increase revenues through pricing strategies like raising prices, adding services, or introducing new products. It also defines types of revenues including total revenue, average revenue, and marginal revenue. Formulas are given for calculating each type. The purpose of revenue analysis is to help companies determine how to significantly grow their revenues and profits.

Uploaded by

Mirabel Vidal
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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REVENUE ANALYSIS

Learning Objectives:
1. Purpose of Revenue Analysis;

2. Meaning and types of revenue;

3. Various Examples

4. Pricing policies, objectives and


pricing methods;

5. Relationship between revenues


and price elasticity demand.
Revenue analysis helps companies determine
how to increase their revenues significantly. 
REVENUE
• Revenue is the receipt of money from
the sale of firm’s output of goods or
services in a given time period.

• It is the money coming in to a firm.


Gross Income for Accounting Purposes

Total Sales Less Cost of Goods Sold (Sale of Goods)

Total Sales Less Cost of Sales (Sale of Service)


Gross Income for Tax Purposes = Revenue

Section 32 of the NIRC

It means all income derived from whatever source,


including but not limited to the following items
enumerated therein (interest, rents, royalties, dividend).
WHAT DETERMINES REVENUE?
Revenue is determined by two things:

• How much is sold.


• How much unit is sold

Revenue = Units Sold x Price per Unit


To generate more revenues, companies can:

 Increase the prices of existing products and services;

 Offer add-on services for an additional price;

 Introduce new products or services at a higher price point;

 By increasing the quantity sold.

Firms accomplish this by lowering prices or increasing their


marketing efforts to stimulate demand.
TYPES OF REVENUES
 

 Total Revenue =
 Average Revenue =
 Marginal Revenue =
Total Revenue
A firm sold 5,000 units of a commodity at the rate of ₱5
per unit, then Total Revenue (TR) would be:   
 
where:
P = Price per unit
Q = Quantity sold
 
TR = P x Q = 5 x 5000 =  ₱ 25,000.00.  
 
Average Revenue
A firm sold 5,000 units of a commodity for a  Total
Revenue (TR) of ₱ 25,000.00, the Average Revenue (AR)
would be:   
 
 
AR =  TR / Q  
₱ 25,000.00/5,000 
AR =  ₱ 5.00 
 
Marginal Revenue

A firm can sell 10 units at ₱20 each or 11 units at  ₱19
each, then the Marginal Revenue(MR)  from the eleventh 
unit is 

 MR = ­ Change in TR/Change in Quantity Sold 


= (11 ×  ₱19) - (10 ×  ₱20)  / (11-10)
  = ₱209 - ₱200 / 1
=  ₱9/1
= ₱9
Marginal Revenue
A firm can sell 10 units at ₱20 each or 11 units at  ₱19
each, then the Marginal Revenue(MR)  from the eleventh  unit is 

 MR = Revenue on additional unit/s minus loss in revenue on


previous units resulting from price reduction
= (1 ×  ₱19) - (10 ×  [₱20-₱19])  
  = ₱19 – (10 x ₱1)
=  ₱19 – ₱10
MR = ₱9
The difference between sales revenue and profit is an
important distinction for all sales and financial departments to
acknowledge. Sales revenue is the amount collected for
products and services. However, not all sales revenue is
turned into profit.

That’s why managerial economics is essential in every


business venture!

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