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Revenue vs Profit: Definition, examples and tips for beginners 📈
First we have to undertand what Revenue is, The Profit. Then we will explain the difference
What is Revenue?
Revenue is the total amount of money you earn from selling your products or services before subtracting any expenses. It’s the income your business generates from clients or customers.
What is Profit?
Profit is the money you keep after paying all your business expenses. It’s what’s left over from your revenue once you’ve covered costs like materials, tools, marketing, or taxes.
Revenue vs Profit, what's the difference?
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Revenue shows how much money your business brings in.
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Profit shows how much money your business keeps after costs.
Revenue vs Profit Example ∑
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Let’s say you’re a self-employed baker:
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Revenue: You sell 100 cakes at $20 each.
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Revenue Calculation = 100 × 20 = 2,000
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Your revenue is $2,000.
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Expenses: You spend $1,200 on ingredients, packaging, and electricity.
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Profit Calculation: Subtract your expenses from your revenue:
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Profit = 2,000 − 1,200 = 800
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Your profit is $800.
​So:
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Revenue = Total money earned ($2,000)
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Profit = Money left after expenses ($800)
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How top calculate Marginal Revenue
Marginal Revenue = Change in Total Revenue​ ➗ Change in Total Revenue​
If your total revenue increases from $500 to $600 when you sell one more item, your marginal revenue is:
Change in revenue = 600 - 500 = 100
Change in quantity sold = 1
Marginal Revenue = 100​ ➗ 1 = 100​
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This means selling one more product earns you an extra $100.
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