Total Revenue

(noun)

Total revenue is the total receipts of a firm from the sale of any given quantity of a product.

Related Terms

Examples of Total Revenue in the following topics:

  • Profit-Maximization Pricing

    • Revenue is the amount of money that a company receives from its normal business activities, usually from the sale of goods and services (as opposed to monies from security sales such as equity shares or debt issuances).To obtain the profit maximising output quantity, we start by recognizing that profit is equal to total revenue (TR) minus total cost (TC).
    • The profit-maximizing output level is represented as the one at which total revenue is the height of C and total cost is the height of B; the maximal profit is measured as CB.
    • The above method takes the perspective of total revenue and total cost.
    • A firm may also take the perspective of marginal revenue and marginal cost, which is based on the fact that total profit reaches its maximum point where marginal revenue equals marginal cost.
    • This linear total revenue curve represents the case in which the firm is a perfect competitor in the goods market, and thus cannot set its own selling price.

  • Profit

    • To obtain the profit maximizing output quantity, you start by recognizing that profit is equal to total revenue (TR) minus total cost (TC).
    • In , the linear total revenue curve represents the case in which the firm is a perfect competitor in the goods market, and thus cannot set its own selling price.
    • The profit maximizing output level is represented as the one at which total revenue is the height of C and total cost is the height of B; the maximal profit is measured as CB.
    • Since total profit increases when marginal profit is positive and total profit decreases when marginal profit is negative, it must reach a maximum where marginal profit is zero - or where marginal cost equals marginal revenue - and where lower or higher output levels give lower profit levels.
    • This linear total revenue curve represents the case in which the firm is a perfect competitor in the goods market, and thus cannot set its own selling price.

  • Break-Even Analysis

    • The break-even point is the point at which costs and revenues are equal.
    • In economics and business, specifically cost accounting, the break-even point is the point at which costs or expenses and revenue are equal - i.e., there is no net loss or gain, and one has "broken even" .
    • In the linear Cost-Volume-Profit Analysis model, the break-even point - in terms of Unit Sales (X) - can be directly computed in terms of Total Revenue (TR) and Total Costs (TC) as: where TFC is Total Fixed Costs, P is Unit Sale Price, and V is Unit Variable Cost.
    • Thus the break-even point can be more simply computed as the point where Total Contribution = Total Fixed Cost:
    • We can derive the calculation for the break-even quantity from the relation of total revenue to total costs.

  • Calculating Market Share

    • Unit market share (%) = 100 * Unit sales(#) / Total Market Unit Sales(#)
    • Unit sales (#) = Unit market share (%) * Total Market Unit Sales (#) / 100
    • Total Market Unit Sales (#) = 100 * Unit sales (#) / Unit market share (%)
    • -- Revenue market share: Revenue market share differs from unit market share in that it reflects the prices at which goods are sold.
    • Revenue market share (%) = 100 * Sales Revenue ($) / Total Market Sales Revenue ($)

  • Estimating the Addressable Market

    • Total addressable market (TAM) is a term that is typically used to reference the revenue opportunity available for a product or service.
    • Total addressable market (TAM), also called total available market, is a term that is typically used to reference the revenue opportunity available for a product or service.
    • TAM can be defined as a global total (even if a specific company could not reach some of it) or, more commonly, as a market that one specific company could serve (within realistic expansion scenarios).

  • Transfer Pricing

    • However, if they set this price too high then the Indiana division will not make their required profit, and the total company will have less of a profit.
    • But marginal cost of production can be separated from the firm's total marginal costs.
    • Likewise, the marginal revenue associated with the production division can be separated from the marginal revenue for the total firm.
    • This is referred to as the Net Marginal Revenue in production (NMR) and is calculated as the marginal revenue from the firm minus the marginal costs of distribution.
    • From marginal price determination theory, the optimum level of output is where marginal cost equals marginal revenue.

  • Marginal Analysis

    • Pricing decisions tend to heavily involve analysis regarding marginal contributions to revenues and costs.
    • Pricing decisions tend to heavily involve analysis regarding marginal contributions to revenues and costs.
    • Since total profit increases when marginal profit is positive and total profit decreases when marginal profit is negative, it must reach a maximum where marginal profit is zero.
    • For example, the marginal revenue curve would have a negative gradient, due to the overall market demand curve.
    • Thus, output should be produced at the maximum level, which also happens to be the level that maximizes revenue.

  • Yield Management Systems

    • Yield management is a large revenue generator for several major industries.
    • The models attempt to forecast the total demand for all products or services they provide, by market segment and price point.
    • Since total demand normally exceeds what the particular firm can produce in that period, the models attempt to optimize the firm's output to maximize revenue.
    • Optimization can help the firm adjust prices and allocate capacity among market segments to maximize expected revenues.
    • While yield management systems tend to generate higher revenues, the revenue streams tend to arrive later in the booking horizon as more capacity is held for late sale at premium prices.

  • Competition Based on Value

    • For a firm to deliver value to its customers, it must consider what is known as the "total market offering. " This comprises the organization's reputation, staff representation, product benefits, and technological characteristics as compared to competitors' market offerings and prices.
    • The migration from product-oriented to customer-oriented strategies is called Total Customer Value Management (TCVM).
    • This image shows how value creation is tied to cost and revenue.

  • Markup Pricing

    • Information on demand and costs is not easily available; however, this information is necessary to generate accurate estimates of marginal costs and revenues.
    • The total cost has two components: total variable cost and total fixed cost.
    • This return can be considered RsX, where Rs is the ratio of the respective share of total profit.
    • The total average cost for a product is determined by dividing the total fixed costs (TFC) and total variable costs (TVC) by the quantity of the product produced, and then summing these together.