Revenue & Sales
The money a business earns from selling goods or services before expenses are deducted.
What is Revenue?
The direct cost of producing or purchasing the products a business sells.
Cost of Goods Sold (COGS)
Revenue minus cost of goods sold.
Gross Profit
Gross profit divided by revenue, multiplied by 100.
Gross Profit Margin
A financial statement showing a business's revenues, expenses, and profit over a period of time.
Income Statement
The total amount earned from customers purchasing products or services.
What is Sales Revenue?
Costs associated with making a specific product or delivering a specific service.
Direct Costs
Gross profit minus operating expenses.
Operating Profit
Net profit divided by revenue, multiplied by 100.
Net Profit Margin
The cost a business pays for borrowing money.
Interest Expense
Sales revenue remaining after returns, allowances, and discounts are deducted.
What is Net Sales?
Expenses necessary to run the business, such as rent, advertising, and office supplies.
Operating Expenses
The money remaining after all recognized expenses, interest, and taxes are deducted.
Net Profit
Operating profit divided by revenue, multiplied by 100.
Operating Profit Margin
The portion of a long-term asset's cost recognized as an expense over time.
Depreciation
DK Coffee sells 100 drinks at $5 each. What is its sales revenue?
$500
DK Coffee purchases coffee beans and cups used to make drinks. What category do these costs belong to?
COGS
Revenue is $10,000 and COGS is $4,000. Calculate gross profit.
$6,000
DK Coffee earns $4,000 in gross profit on $10,000 in revenue. Calculate gross profit margin.
40%
DK Coffee receives a $10,000 loan. Should the $10,000 be recorded as revenue?
No. Borrowed money is not revenue.
DK Coffee earns $5,000 in sales but gives $200 in refunds. What are its net sales?
$4,800
DK Coffee pays $1,500 in rent and $300 for advertising. What is the total operating expense?
$1,800
Gross profit is $6,000 and operating expenses are $3,500. Calculate operating profit.
$2,500
DK Coffee earns $1,500 in net profit on $10,000 in revenue. Calculate net profit margin.
15%
DK Coffee purchases a $6,000 espresso machine. Should the entire purchase automatically be recorded as an expense that month?
No. Equipment is generally capitalized and depreciated over its useful life.