Total revenue is the amount of money which your company brought by its activities of selling. A company’s total revenue should be calculated precisely to find out the profit that the company earned.
Total Revenue is also called total sales that the company generated by selling the goods and services. Total revenue is the amount drawn by the seller by selling their goods and services.
Total Revenue can be simply sales or interest and dividend from investment.
For example: If you have a cafe, that cafe is selling many delicacies including chocolates, coffees, beverages, snacks, etc., The total revenue of that cafe is the overall sales of all the foods and beverages.
Total Revenue= P*Q
P= Price of the goods;
Q= quantity of the goods sold.
Why is Total Revenue is Important
Revenue is the most important aspect for a company to run in the long run. You’ve to calculate the total revenue to know the profit of the company and the expenses which should be paid off.
If you don’t have any revenue, the company will go on a negative path or it will be a great loss for the company. Profit is the amount which a company holds after all the expenses from the revenue the company generated.
The Formula for Calculating Total Revenue
Total Revenue (TR) = Price of the good (P) * Total Production (TP)
Where to Find your Total Revenue
To find out where the total revenue of your company is, you can check that in your income statement. An income statement is a record of how your company worked in a certain period. It may be a month or quarter year or a half-year or a whole year.
The income state consists of 3 sections with Total revenue, Cost of Goods Sold, Operating Expenses. This three-section contains every record of your financial statement for the accounting period.
Calculating Total Revenue
To calculate the sales revenue we can simply take the average price of the product that was sold and multiply it by the number of units sold.
The total revenue of the company is dependent upon the average price of the product and the number of units sold. So, to calculate the total revenue you have to know the price and unit.
- If the company is goods based industries, you can use the above formula (TR = P*TP)
For example: Let’s take an ice cream company as an example, Your company sold 5000 ice cream that month (Including all types and flavors), and per icecream’s average cost is $3. Now to calculate this by using the Total revenue formula.
Total Revenue = P*TP
= 5000* $3
This is the total revenue of the ice cream company.
- If your company is a service-based company, you can use the below formula to calculate the total revenue;
Total Revenue = Average price per service sold * Number of services sold.
After calculating your total revenue, you can compare your result with the expenses, if the expenses exceed, your company is facing loss, if the expenses deficits, your company is attaining a profit. If your company is facing a loss you can adjust the expenses and do it accordingly.
Total revenue is the main thing you’ve to calculate to know the finance of your company. After knowing the revenue you can check out your expenses and profit. If the expense decreases, profit increases If expense increases, profit decreases. Hope this helps.