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Revenue

Revenue is the amount earned from product sales excluding VAT, measured as the transaction price the seller expects to receive. Revenue is reduced by discounts, promotions, or incentives funded by the seller, but not by discounts funded by the marketplace platform. Formula: Revenue = Units Sold × Net Selling Price (ex-VAT)

Why It Matters

  • •Revenue is the foundation for calculating gross profit, margin, contribution margin, and unit economics.
  • •Including VAT would distort profitability metrics, make SKUs incomparable across markets, and inflate perceived performance.
  • •Consistently using revenue ex-VAT aligns pricing, accounting, and financial analysis.

Connection to Capital

Revenue determines the inflow side of the financial cycle. Because VAT does not represent economic value to the seller, removing VAT ensures that margins, CCC, and expected return on investment reflect true business performance.

Related Terms

Gross Profit (GP) Cash Net Proceeds Working Capital

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