It's a common misconception that "profit" and "revenue" are interchangeable terms. Many people simply believe that these refer to the amount of money that a business makes, but this isn't entirely true. In fact, as you get down to the finer details, you will start to see that there are many aspects that separate the two. For those that would like to learn the differences between profit and revenue, here is some insight provided by Robert Jain.
For those that are unfamiliar with the term "profit," it's essentially the money that's made after putting in an initial investment. Let's say that, for the sake of argument, that you run social media ads to bring users to your company's website. These cost money, but it's determined that the initial expense will be made up by the additional ecommerce sales that you bring in. According to names like Bob Jain, between expenses and returns, profits will be determined.
It's worth noting that profits have different subtypes that are worth going into detail about. Net profits, for example, is determined by taking revenue and subtracting expenses, which range from taxes to utilities. Operating profit takes into account operating costs, including overhead. Gross profit focuses on the production of goods and associated costs. There is more to learn, but these are the general definitions to start with.
Now that you know what a profit is, let's discuss revenue. By definition, revenue is the total amount of money that a company brings in, typically in regard to the products and services that they offer and sell. It can also include any royalties that are paid to them by third parties, though this doesn't always apply. In any event, revenue is determined before any deductions are made, which is one of the main reasons it cannot be interchanged with profit.
Revenue isn't the same for all businesses, though, as it's generated through different means. Let's say that you decide to open a bakery; your revenue would be determined by the number of pastries, cakes, and other sweets that you sell. If you were to start your own computer repair or IT business, revenue would be generated by the repairs and maintenance done to your clients' computers, phone systems, and the like. Needless to say, revenue is a flexible term.
For those that are unfamiliar with the term "profit," it's essentially the money that's made after putting in an initial investment. Let's say that, for the sake of argument, that you run social media ads to bring users to your company's website. These cost money, but it's determined that the initial expense will be made up by the additional ecommerce sales that you bring in. According to names like Bob Jain, between expenses and returns, profits will be determined.
It's worth noting that profits have different subtypes that are worth going into detail about. Net profits, for example, is determined by taking revenue and subtracting expenses, which range from taxes to utilities. Operating profit takes into account operating costs, including overhead. Gross profit focuses on the production of goods and associated costs. There is more to learn, but these are the general definitions to start with.
Now that you know what a profit is, let's discuss revenue. By definition, revenue is the total amount of money that a company brings in, typically in regard to the products and services that they offer and sell. It can also include any royalties that are paid to them by third parties, though this doesn't always apply. In any event, revenue is determined before any deductions are made, which is one of the main reasons it cannot be interchanged with profit.
Revenue isn't the same for all businesses, though, as it's generated through different means. Let's say that you decide to open a bakery; your revenue would be determined by the number of pastries, cakes, and other sweets that you sell. If you were to start your own computer repair or IT business, revenue would be generated by the repairs and maintenance done to your clients' computers, phone systems, and the like. Needless to say, revenue is a flexible term.
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