What is the equation used to calculate revenue?

The equation used to calculate revenue is based on the fundamental relationship between price and quantity sold. Revenue is determined by multiplying the price at which goods or services are sold by the quantity of those goods or services that are sold. This equation encapsulates the total income generated from sales before any costs or expenses are deducted.

When a business sells a product, the price reflects the amount received for each unit sold. By multiplying this price by the total number of units sold, you arrive at the total revenue, which is a crucial figure for assessing a company's performance. This formula is essential for managers to evaluate sales effectiveness, set pricing strategies, and forecast future earnings.

The other options do not accurately represent the relationship between sales price and quantity in terms of revenue calculation. For example, cost and added quantities or subtracted quantities do not provide a proper understanding of revenue generation, which is strictly a function of the price per unit multiplied by the volume of sales.