Revenue is the total amount of money earned by the company from the sale of its goods or services during a specific period of time, usually a year, a quarter or a month. It is the top line of the company's income statement, which shows the company's total sales and other sources of income.
Revenue is the most important financial metric for a company because it represents the inflow of income into the company from its customers. It is used to measure the company's performance and growth, and is often compared to its expenses to determine its profitability.
Revenue can come from various sources, such as the sale of products or services, licensing fees, advertising, or other forms of income. It does not include any expenses or costs associated with generating that income, such as the cost of goods sold or operating expenses.
Company called ABC sells computer software. In the month of January, ABC sold 1,000 copies of its software for $100 each. The total revenue generated by ABC in January would be:
Revenue = Number of units sold x Price per unit
Revenue = 1,000 x $100
Revenue = $100,000
So, in this example, the revenue of ABC for the month of January is $100,000. This means that the company earned $100,000 from the sale of its software during that month. Increasing revenues over time are generally a good sign of company's growth.