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Revenue ≠ Profit
Give me 30 seconds, and I'll explain the difference!
→ What is Revenue?
The total income a business earns from selling its products or services to customers. It's the income generated before deducting any expenses.
→ Sources of Revenue:
Sales: Money earned from selling products or services to customers.
Services: Income from providing specific services to customers.
→ Found:
The top line of the Income Statement.
→ What is Profit?
Profit is what remains after deducting all expenses from revenue.
→ Types of Profit:
Gross Profit: Revenue minus the Cost of Goods Sold.
Operating Profit: Gross Profit minus Operating Expenses.
Net Profit: Operating Profit minus Taxes and Interest.
→ Found:
The bottom line of the Income Statement
→ 3 key profitability ratios:
1️⃣ Gross Margin:
Formula: (Gross Profit / Revenue) * 100
2️⃣ Operating Margin:
Formula: (Operating Income / Revenue) * 100
3️⃣ Net Margin:
Formula: (Net Income / Revenue) * 100
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