The total revenue is a key financial metric that represents the total income generated by a business from the sale of goods or services before any expenses or deductions are taken into account. The total revenue formula is relatively straightforward and is calculated by multiplying the price at which a product or service is sold by the total quantity of units sold. The formula for total revenue is as follows:
Total Revenue = Price per Unit * Quantity of Units Sold
For example, if a company sells 100 units of a product at a price of $50 per unit, the total revenue would be:
Total Revenue = $50 * 100 = $5000
This means that the company has generated $5000 in total revenue from the sale of its products.
Total revenue is an essential component in various financial analyses, including profit calculations, break-even analysis, and assessing a company’s overall financial performance. It is important to note that while total revenue indicates the overall sales generated by a company, it does not reflect the company’s profitability, as it does not account for the costs associated with producing or delivering the goods or services. To determine profitability, total revenue needs to be considered in conjunction with total costs, which include both variable costs and fixed costs.