Revenue, Costs and Profit

This lesson covers the key financial concepts of revenue, costs, and profit — the calculations that underpin business decision-making. You need to understand how these are calculated, how they are related, and why they matter. This is essential material for AQA topic 3.1.1.

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Revenue

Key Definition: Revenue (also called turnover or sales revenue) is the total income a business receives from selling its goods or services. It is calculated as:

Revenue = Price per unit × Quantity sold

Example

A bakery sells 500 loaves of bread per week at £2.50 each:

Revenue = £2.50 × 500 = £1,250 per week

Important Points About Revenue

• Revenue is not the same as profit — a business can have high revenue but still make a loss if costs exceed revenue.
• Revenue can increase by raising the price per unit or by selling more units — but raising prices may reduce the quantity demanded (depending on price elasticity of demand, which you will study later).
• Some businesses have multiple revenue streams — for example, a gym earns revenue from memberships, personal training sessions, merchandise, and café sales.