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Revenue is earned when goods are delivered or services are rendered. [1] The term sales in a marketing, advertising or a general business context often refers to a free in which a buyer has agreed to purchase some products at a set time in the future. From an accounting standpoint, sales do not occur until the product is delivered.
A typical example of a funnel chart starts with the sales leads on top, then down to the qualified leads, the hot leads and the closed deals. A business is bound to lose some number of potential deals at each step in the sales process and this is represented by the narrowing sections as you move from the top section (the widest) to the bottom section (the narrowest.)
The behavior of both costs and revenues is linear throughout the relevant range of activity. (This assumption precludes the concept of volume discounts on either purchased materials or sales.) Costs can be classified accurately as either fixed or variable. Changes in activity are the only factors that affect costs.
Discount Rate: The cost of capital (Debt and Equity) for the business. This rate, which acts like an interest rate on future Cash inflows, is used to convert them into current dollar equivalents. This rate, which acts like an interest rate on future Cash inflows, is used to convert them into current dollar equivalents.
The term 'cash flow' is mostly used to describe payments that are expected to happen in the future, are thus uncertain, and therefore need to be forecast with cash flows. A cash flow (CF) is determined by its time t , nominal amount N , currency CCY , and account A ; symbolically, CF = CF( t , N , CCY, A) .
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Price and total revenue have a negative relationship when demand is elastic (price elasticity > 1), which means that increases in price will lead to decreases in total revenue. Price changes will not affect total revenue when the demand is unit elastic (price elasticity = 1). Maximum total revenue is achieved where the elasticity of demand is 1.
[clarification needed] Apart from accounting requirement, there is a need for calculating the percentage of completion for comparing budgets and actuals to control the cost of long-term projects and optimize Material, Man, Machine, Money and time (OPTM4). The method used for determining revenue of a long-term contract can be complex.