Updated: Sep 19
Revenue is an important business metric because it shows how much money a business makes from selling goods or services. Businesses use revenue to figure out how healthy their finances are, plan for future investments, and evaluate their overall performance.
Learn more by watching the video and reading the blog post below:
To figure out how much money was made, multiply the number of items sold by the price.
The formula is simple: revenue = quantity sold x selling price
Let's look more closely at this formula and see how it can be used to figure out how much money a business makes.
The number of items sold is the first part of the formula. This shows how many units of a product or service a business has sold during a certain time frame. Say, for instance, that a coffee shop sold 100 cups of coffee in one day. In this case, the quantity sold in the formula is 100 units.
The selling price is the second part of the formula. This is the amount of money a business charges for each product or service it sells. For example, let's say that each cup of coffee at the coffee shop costs customers £2.50. In this case, the selling price used in the formula is £2.50.
Now, let's add the two parts together to figure out how much money was made. Using the formula revenue = quantity sold x selling price, we can figure out how much money the coffee shop made in a day:
Revenue = 100 x £2.50
Revenue = £250
Since each cup of coffee cost £2.50, the coffee shop made £250 by selling 100 of them.
Let's look at another case. Let's say a store sells 50 shirts for £25 each. Using the revenue formula, we can figure out how much money the shop made:
Revenue = 50 x £25
Revenue = £1,250
So, the clothing shop made £1,250 by selling 50 shirts for £25 each, which brought in 50 times £25 = £1,250.
In conclusion, revenue is an important metric for any business, and it can be calculated with the formula revenue = quantity sold x selling price. By learning this formula and using it to figure out revenue, businesses can learn a lot about their financial health and make smart choices about where to invest and grow in the future.