AFM 191 - 4.1 how do companies make money?

Question 1

What’s the basic revenue equation

Answer 1

price of goods or services x number of units sold or services provided

Question 2

Define revenue

Answer 2

the money generated by a company form normal business operations

Question 3

Why are businesses most concerned about revenue within a context of time?

Answer 3

used as a metric from internal + external stakeholders to measure and analyze growth

Question 4

Why do businesses have a unique revenue account for different items of goods it sells

Answer 4

to organize its chart of accounts and revenue accounts + to obtain more meaningful information when analyzing company results as it facilitates easier decision making (adds most business value)

Question 5

What type of source document is an invoice?

Answer 5

source documents that represent a request for payment - that accompanies revenue transaction

Question 6

What’s the role of a receipt in terms of a course document?

Answer 6

document confirming you have made the payment for which good or service you purchased.

Question 7

Define credit terms

Answer 7

requirement to pay within a specificied timeframe, potential discounts, and late payment penalites

Question 8

define trade creit

Answer 8

discount offered by a seller to entice you to pay for the sale quicker

Question 9

What does “2/10 net 30” mean?

Answer 9

trade credit that states if you pay me within 10 days, I’ll give vou a 2% discount, you have 30 days to pay regardless, but if you pay after day 10, there’s no discount.