Revenue and Profit

Revenue is the amount of money a company receives from selling its goods and services. It’s also referred as sales or turnover.
It is calculated as the Price of goods or services sold multiplied by the Quantity sold.
Total Revenue (TR) increases with every unit sold. As more units are sold, this translates into increased total revenue.
When pricing products, a firm must ensure the price is competitive enough to attract customers while also covering costs and making profit.
If a firm adopts a price-elastic strategy, it focuses on how changes in price affect demand. When demand is elastic, a decrease in price generates more revenue.

Profit is the difference between revenue and costs. It’s often the main objective of businesses and can be reinvested or paid out to shareholders.
There are two types of profit: Gross profit and Net profit. Gross profit is revenue minus cost of goods sold, while Net profit is gross profit minus other operating expenses
Profit Maximisation is a short term objective, achieving the highest possible profit in the short run. Firms aim to increase price and reduce costs.
Profit Satisficing is a long term objective; the firm aims to earn enough profit to keep stakeholders happy, while pursuing other objectives.
Supernormal Profit is a longer term business objective, achieved when total revenue exceeds total cost, including opportunity costs.

Market Demand: Demand variations will affect revenue and therefore profit. If goods or services are in demand, a company will be able to sell more and increase revenue.
Costs and Expenditure: If costs are high in relation to revenue, profit will be reduced. Some costs are fixed and others can be reduced by efficient management.
Price Elasticity of Demand (PED): PED refers to how much demand for a good or service changes when its price changes. If a good or service is elastic, a small change in price could cause a large change in demand.
Competitors: The number of competitors and their pricing and marketing strategies can severely impact a company’s revenue and profits.
Economic Environment: Economic conditions can impact both demand for products and the cost of inputs, affecting revenue and profits. In a recession, demand may fall while costs may increase due to inflation.