Answer to Question #285197 in Microeconomics for Shivam Thapliyal

Question

Revenue. Is the most important part of buisness discuss its relevance in differnet market situations

Answer 1

A company need a collective revenue to identify and make use of the varying and fixed expenses it incurs in order to operate the business. In essence, revenue – profit made by a company in a market – is what is needed for a business to run and be relevant. Zero revenue from the market or a deficit for the company will ultimately lead to bankruptcy and closure of the firm indefinitely.

Revenue is important in the pricing strategy of a company. For a company to fairly price its products in the market, revenue accrued during a certain period has to be managed accordingly within the firm. Research has to be done in the market and a price level determined so as to give the firm an edge over its competitors.

Expansion of available markets can only be achieved through the right use of revenue management. A firm’s revenue can be used to identify a new viable market, introducing itself to the market and competing fairly with the already established firms in the particular market. On the other hand, zero revenue in a firm will not allow the firm to establish and compete in new markets, leading to zero growth.

Revenue is the first metric a company gets and it represents the starting point for companies to determine their income which is the basis for calculations and reports critics.