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Finance: What are Revenues? 73 Views
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What are revenues? Revenue is the amount of money a company brings in after they’ve accounted for returns and discounts and such. It’s just what was brought in; it doesn’t account for costs that have to go out.
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Transcript
- 00:00
finance a la shmoop what are revenues? well revenues are this magical thing.
- 00:08
they happen when you sell stuff from your business. 14 opera singing [man shrugs]
- 00:13
Teddy bears, forty bucks each five hundred sixty dollars. total nine custom-built
- 00:18
Japanese body pillows eighty bucks each seven hundred twenty dollars total. a
- 00:23
business so weird you can't tell your family and friends about it? [man peeks from behind a door]
Full Transcript
- 00:28
priceless. revenues are what Wall Street analysts call top-line. because on an
- 00:33
income statement shows up right here. seems simple right? but from an
- 00:37
accounting perspective revenues get recognized in different ways. like let's [accounting document shown.]
- 00:42
say you sell a season pass to a golf course for five hundred bucks. on this
- 00:46
golf course happens to be somewhere in the Arctic Circle so the season is only
- 00:51
five months long. unless you like playing in the snow and stressing about hungry
- 00:56
polar bears and are basically a complete idiot. so the customer pays you five [man golfs in the snow]
- 01:00
hundred bucks up front to play as much as they want on your course. you made the
- 01:05
sale of five hundred dollars on May 1st, the first day of the season, but are
- 01:11
those all recognized as revenues that day? well it depends if there is no [definitions on screen]
- 01:16
money-back guarantee and you keep the five hundred bucks no matter what, well
- 01:20
then maybe yeah. you can recognize all of those revenues then upfront and you're
- 01:24
done. but what if there's a fine print that [man and woman exchange documents]
- 01:27
says if you play zero times in a month well you don't have to pay for that
- 01:32
month and you get a refund at the end of the season in October.
- 01:37
well you can't recognize the revenue upfront now, at least not all of it. [ATM machine]
- 01:41
instead you can recognize a hundred dollars worth of revenues each time
- 01:45
someone clearly plays on your course. ie even one round of golf confirms that
- 01:51
they have used the hundred dollar all-you-can-eat in a month deal on your
- 01:56
course. you can imagine then that well you have to reserve some kind of money [man drives golf cart]
- 02:01
back refund set of payments when the season is over and you just have to
- 02:05
track every single season and pass fires progress on your golf course. all right
- 02:09
well the key idea here is that revenues don't necessarily equal sales,
- 02:13
and that recognizing revenues usually entails that the revenues are [man smiles from golf course]
- 02:18
irrevocable. that is they have passed their money-back guarantee period and
- 02:22
will remain in your little piggy bank until next season. and what do you do
- 02:26
with all those revenues? well ever hear of polar bear repellent? yeah will do [people run from polar bear]
- 02:31
wonders for customer retention rates.
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