What is gross revenue, and how to calculate it?

The key goal of absolutely any structure of a commercial type is to find its place in the market, gaining trust and recognizing the consumer. These factors serve to maximize profits, which directly depends on gross income. And what is gross income? How to calculate it? What is the mechanism of its formation? This article describes this in detail, as well as sources of gross income, the principles of its distribution and planning, and, of course, the connection with a category such as profit.

The concept of gross income

What is gross income? This term should be understood as the aggregate income of a particular structure from absolutely any type of entrepreneurial activity and related operations before paying taxes from it that are directly included in the price of the product. Such tax payments include VAT, excise duty, as well as customs duties and duties. Thus, the volume of gross income of enterprises of production type is calculated on the basis of gross income from the sale of the product.

The gross income of any structure serves as its financial base, which in turn organizes the solution of very interesting problems. Thus, a large part of the named income of an organization serves as a source of reimbursement for absolutely all of its costs in the current time, directly related to the implementation of entrepreneurial activities. The solution of this task is, first of all, self-sufficiency in relation to the current economic activity of the structure.

What other tasks?

Having determined what gross income is, you need to know its functions. In addition to the above paragraph, the tasks to be performed with its help include the following:

• A significant portion of the gross income structure is a source that allows you to intelligently organize the payment of tax payments. Thus, the formation of budgetary funds at both the state and local levels is ensured. It is thanks to this that the financial obligations of the structure to the state are fully met.
• As it turned out, the named income of the firm is characterized by two key indicators: its level and amount. In addition, the gross revenue and revenue of the enterprise are divided into several parts. So, the share of the gross income structure is the source of creating its profits. It is through this that development funds are formed in the sphere of production, incentives for employees financially, payments for social needs, a reserve fund, and so on. The fulfillment of this function fully organizes self-financing of the development of the structure in the future.

Calculation of

What is gross revenue, and how to calculate it? As we have already explained, gross income is nothing more than the amount of money that an entrepreneur receives from the sale of his product. It directly depends on the quantitative characteristics of the goods or services sold, as well as on the price of them. How to calculate this indicator? The process of creating gross income for one type of product is represented by the following formula:

VD = product realization price * quantity of product .

It is important to note that the degree of income from the sale of the product can be expressed through the yield coefficient:

In (drp.f) = gross income from the sale of the product / volume of product sales in the current period .

Often an additional indicator, called net profit, is calculated additionally. Through it you can get and gross income:

Gross income = net profit + total amount of taxes, fines and penalties.

The process of generating gross income

It would be advisable to consider the entire algorithm for the formation of the indicator considered in the article:

1. The structure that produces this or that product, introduces it to the market of goods and services.
2. This product is gradually beginning to enjoy the increasing and greater demand of the consumer. Thus, the firm is firmly entrenched in the market.
3. Consumers buy goods or use this or that service.
4. The structure receives cash payments.

Analysis

In the last paragraph we are talking about the funds coming into the treasury of the company through the implementation of 1-3 transactions. They are the gross income of the firm. But it should be noted that the money that comes into the hands of the structure at the expense of sold products is only a part of this income, for it is formed, as we have already said, thanks to all possible revenues.

Among them may be income from insurance, funds provided as assistance to the company from individuals or legal entities, bank interest, the values accepted by the structure for storage in accordance with the earlier concluded agreement, funds received as a result of operations with securities (shares, bonds ) and so on. We will discuss this issue in detail in the next chapter.

Composition of gross income

Thus, the following positions are among the components of gross income:

• Cash that is received as a result of litigation (in case of winnings).
• Penalties and fines, which the structure pays a certain legal entity (less often - physical).
• The values accepted by the enterprise for storage in accordance with the concluded agreement.
• The share of cash from the insurance reserve of the company (as a rule, they are returned or used not for their intended purpose).
• Help the company in financial terms.
• Cash that is obtained as a result of various kinds of interactions. A vivid example of this can serve as dividends or interest on debt obligations.
• Cash received from the sale of securities.
• Bank interest.
• Income from insurance.

Factors affecting the amount of HP

Nobody will argue with the fact that the gross income of the country and individual structures is primarily formed on the basis of consumer confidence. The higher the level of this trust, the more a person will get the product. However, other equally important factors are known that determine the magnitude of gross income. Among them:

• The production factor. It is understood as the importance of the quality of the product itself and its price. In addition, the final result is equally influenced by the production capacity of the structure and the amount of the product created as a consequence.
• Sales factor. It involves the provision of fast shipment of goods, the practical preparation of the relevant documentation, the strict observance of the conditions prescribed in the contract, as well as the competent organization of logistics operations in relation to sales. All this fully ensures the achievement of maximum indicators relative to the amount of gross income.

Other factors

It should be noted that there are also factors that the producer is not able to influence. It would be appropriate to include the following:

1. Compliance with the terms of the transaction by the buyer (or their non-compliance).
2. The opportunity to pay for the purchase on time from the client.
3. Weather.
4. Absence of some shortcomings in respect of transport services (or their availability).
5. Delays in the process of loading or unloading goods.

In conclusion, it should be noted that the amount of gross income, mainly depends on the price and quantity of a product that was sold. Also, this amount is well influenced by the terms of trade, the characteristic features of the product (usually qualitative), as well as the seller's capabilities and buyer's confidence.