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Understanding the Difference Between Revenue and Profit

The total income acquired by the sale of goods or services related to the firm’s primary operation is called revenue. Profit, usually called net profit of the bottom line, is the amount of income that stays after accounting for all debts, expenses, additional income streams, and operating costs.

Revenue

Revenue is typically referred to as the top line since it sits at the top of the income statement. The revenue number is the income a firm produces before any expenses are taken out.

For example, with a shoe seller, the money it earns from selling shoes before computing for any expenses is its revenue. If the firm also has income from investments or a subsidiary firm, that income is not the revenue; it does not come from the cost of shoes. Various types of expenses and additional income streams are accounted for individually.

Profit

Profit, also called the bottom line, is referred to as net income on the income statement. There are variations of gain on the income statement that is used to assess the achievement of a company.

However, there are some profit margins in the middle of the top line (revenue) and bottom line (net profit); the word “profit” may appear in the context of operating profit and gross profit. These are ways to net profit.

Gross profit is revenue less than the cost of products sold (COGS), which are the direct prices attribute to the production of the products sold in a company. This amount includes the value of the materials used in making the goods along with the direct labor costs used to generate the goods.

Operating profit is gross profit less than all other fixed and variable expenses related to running the business, such as utilities, rents, and payroll.

Key Differences

When most people refer to a firm’s profit, they are not referring to gross profit or operating profit, but slightly net income, which is the rest after expenses, or also called as net profit. It’s possible for a firm to produce revenue but have a net loss. The loss usually occurs when debts or expenses outstrip earnings.

Special Points

Accrued revenue is also the same as unrealized revenue. Accrued revenue is the revenue acquired by a firm for the delivery of products or services that are needed to be paid by the consumer.

For example, a firm sells widgets for $5 each on a net-30 term to all its consumers and sells ten widgets in August. Since it itemizes its customers on net-30 terms, the firm’s customers do not have to compensate until 30 days after, or on September 30. Therefore, the revenue for August will be treated as accrued income until the firm receives customer payment.

From an accounting standpoint, the company would recognize $50 in revenue on its income statement and $50 in accrued revenue as an asset on its balance sheet. When the firm collects the $50, the cash account on the income statement increases, the accrued revenue account decrease, and the $50 on the income statement will stay unchanged.

Unearned revenue accounts for money prepaid by a consumer for goods or services that have not been delivered. If a firm requires prepayment for its products, it would recognize the revenue as unearned. It would not recognize the revenue on its income statement until the period for which the goods or services were delivered.

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INTRODUCTION
TO FOREX TRADING

I     Advantages of the Forex Market            3
II    Basic Forex Concepts                              8
III   Orders in the Forex Market                     13
IV   Game Plan for Successful Trading       18
V    Beginner Trading Strategies                   25

Chapter 1:

ADVANTAGES OF THE
FOREX MARKET

1.1. What Is The Forex Market?

The Forex market is a place in which investors are allowed to trade foreign currencies in a given trading period. It is considered to be the world’s largest market with a daily output of 3 trillion US dollars.

The value of currencies is constantly changing every minute throughout the day, depending on the supply and demand levels. Therefore, the market is open twenty-four hours a day five days a week.

Compared to other financial mediums, the Forex market provides better security in the world of investment.

The concept of Forex trading is similar to the regular market, where participants buy and sell goods. In the Forex market, traders are buying and selling foreign currencies. There are over 100 currency pairs available in the financial markets.

There is a uniform currency exchange rate used in the global financial markets. Whatever exchange rate is used in New York, it will be the same exchange rate used in other countries.

The Forex market involves an international network of computers and brokers from all over the world.

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