What is REVENUE?
Revenue is all the money a business brings in from selling its products or services. It's like the total amount of money you collect from selling lemonade at your lemonade stand before you pay for the lemons, sugar, or cups.
What is PROFIT?
Profit is the money a business has left after it pays all its expenses. It's what's left over after you pay for the lemons, sugar, and cups for your lemonade stand. Profit shows if your business is actually making money.
Key Differences
- What They Measure: Revenue measures how much you are selling, while profit measures how much money you actually get to keep.
- Calculating: Revenue is easy to calculate – just add up all the money you made. Profit is a bit harder. You need to take your revenue and subtract all your costs.
- Importance: Revenue is important for seeing how popular your products are. Profit is important for seeing if your business is making money or losing money.
When to Use Each One
Let's say you have a candy store. If you want to know which candy is the most popular, you would look at the revenue each candy brings in. If you want to know if your candy store is making enough money to pay rent and buy more candy, you would look at the profit.
If you are running a bake sale, revenue tells you how much money you collected from selling cookies and cakes. Profit tells you how much money you have left after you paid for the flour, sugar, and eggs.
The Bottom Line
Revenue and profit are both important, but they tell you different things. Revenue is like the big number of how much you sell. Profit is the real number of how much money you get to keep. Profit is usually more important because it shows if your business is actually making money.