Revenue and Profit Flashcards
1
Q
What is revenue?
A
The income received by a business from providing a good or service (aka sales income, turnover, takings)
Amount sold X price
2
Q
How can revenue increase?
A
- increase the amount/volume sold
- achieve a higher selling price
3
Q
What is profit?
A
The financial return/reward that entrepreneurs aim to achieve to reflect the risk that they take
Total revenue - total costs
4
Q
Why is profit important?
A
- reward for taking risks
- motivates owners, employees, managers
- measures the success of investment by entrepreneurs or shareholders
- banks and other lenders are more likely to provide finance, you can pay debts
- important source of finance through retained profits
- can attract investors
- employees might be more willing to join
- suppliers more likely to provide on credit as they’ll get paid
