Sales Revenue (DP IB Business Management)

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Lisa Eades

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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
$Sales revenue = quantity sold x selling price$
- 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 marks]

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

39,264 x £8.75 = £343,560 [1]

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

4,280 x £123.95 = £530,506 [1]

Step 3 - Add together the two sales revenue figures

£343,560 + £530,506 = £874,066 [1]

Revenue streams

Revenue can be generated from sources other than sales
These sources are called revenue streams

Diagram: revenue streams

Sources of revenue streams include dividends, donations, sponsorship, interest, subscription fees, and advertising revenue — **Some examples of revenue streams for businesses**

An Explanation of Revenue Streams

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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