Revenue does not = profit
Let’s clear up a bit of confusion around revenue and profit. Basically, they’re not the same thing. I’ve been reading a bunch of student responses that talk about a company earning profit when they really mean revenue…
I want to clarify this misconception. And I’m trying to clarify it by using apples.
Quick facts: revenue is income received by a business (in our example). Profit is the difference between revenue earned AND the cost of selling the products.
Try this example (given to me by a Year 6 student).
You sell apples. You buy them from the wholesaler for $1 each. You then turn around and sell these apples to consumers for $10 each.
Your revenue is $10 (received from the consumer).
Your costs are $1 (the purchase price of the apple for you).
Thus, your profit is a tidy $9 per apple.
Can I also mention that governments don’t generally earn profit? Governments earn taxation revenue. They don’t earn profits from taxation. So, don’t write this. Please.