IBBusiness ManagementHLRevision Notes3. Finance & Accounts3.3 Costs & RevenuesSales Revenue

Sales Revenue (HL IB Business Management)

Revision Note

Flashcards
Lisa Eades

Revenue & Revenue Streams

  • Sales Revenue is the value of the units sold by a business over a period of time
    • E.g the revenue earned by Apple Music from sales of music downloads 
    • Sales revenue is a key business performance measure and must be calculated to identify profit
    • Sales revenue is calculated using the formula

Sales space revenue space equals space quantity space sold space straight x space selling space price
 

    • Sales revenue usually increases as the sales volume increases

  • When a firm sells one product it is easy to calculate the sales revenue
    • The more products a firm sells, the harder it is to calculate the sales revenue
    • Computer systems make it easier to track sales revenue when multiple products are sold by the business

Worked example

Fotherhill Organics Limited sold 39,264 packs of its specialist compost to mail-order customers in 2022. The price per pack was £8.75. In addition, it sold 4,275 tonnes to gardening businesses for £123.95 per tonne.

Calculate Fotherhill Organics sales revenue for 2022? [3]


Step 1 - Calculate the sales revenue from sales to mail-order customers

39,264 x £8.75        =        £343,560       [1 mark]
 

Step 2 - Calculate the sales revenue from sales to gardening businesses

4,280 x £123.95       =        £530,506    [1 mark]
 

Step 3 - Add the two sales revenue figures together

   £343,560 + £530,506            =       £874,066            [1 mark]

Exam Tip

You may be required to calculate the average selling price using the sales revenue figure

In these instances you need to divide the sales revenue by the number of items sold

Revenue Streams

Sources of revenue streams include dividends, donations, sponsorship, interest, subscription fees, and advertising revenue

Some examples of revenue streams for businesses

  • Revenue may also be generated from sources other than sales
  • These sources are called revenue streams
     

An Explanation of Different Revenue Streams Businesses can Generate


Revenue Stream
Explanation
Example

Dividends
  • Businesses sometimes purchase shares in other companies and may be entitled to dividends

  • For holding companies dividends are the primary source of revenue
  • The UK's leading supermarket Tesco received more than £68m in dividends in 2023 from its investments in a range of property companies 

Donations

  • An important source of revenue for not-for-profit organisations such as charities

  • In 2022 Oxfam received over £70m of revenue in the form of donations and legacies

Interest

  • Many businesses hold substantial amounts of cash as bank deposits which earn interest

  • Clothing retailer Zara's parent company Inditex earned £85m net interest revenue in 2022

Subscription fees

  • Some businesses earn the majority of their revenue from subscriptions that allow users to access a product or service for a regular ongoing fee

  • Subscriptions are also frequently offered alongside one-off purchases

  • In 2022 Netflix earned $31.6 billion in subscription revenue in 2022, 40% of which was generated in North America, its largest market

Merchandise

  • Merchandise is a useful way to earn additional revenue alongside core sales of a product or service

  • As well as revenue earned from the sale of broadcasting rights and ticket sales, official merchandise sales during 2016's Rio de Janeiro Olympics reached $15.5 million 

Sponsorship

  • Some organisations attract sponsorship from businesses that are keen to associate themselves with the brand

  • In 2022 FC Barcelona received more than $215 million of sponsorship revenue from 35 worldwide sponsors including Nike, Coca Cola and Allianz Bank

Advertising Revenue
  • Online media businesses - in particular social media - generate the majority of their revenue from advertising
  • In 2022 social media giant Twitter earned $4.14 billion in advertising revenue

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Lisa Eades

Author: Lisa Eades

Lisa has taught A Level, GCSE, BTEC and IBDP Business for over 20 years and is a senior Examiner for Edexcel. Lisa has been a successful Head of Department in Kent and has offered private Business tuition to students across the UK. Lisa loves to create imaginative and accessible resources which engage learners and build their passion for the subject.