Example of money flow inside a business

in #value-investing6 years ago

This picture is a simplification of the money flow inside a business.

flow.jpeg

  1. The money the paying customers that buy the products or services of the business is called the Total Revenue.

  2. The expenses the business has to be functioning, is called the Cost of Revenue.

  3. After paying all the expenses the remaining money is know as Income Before Tax.

  4. The money left after all taxes are payed, it's known as Neto Income some people also like calling it Surplus.

  5. The owner of the company will decide what to do with the Neto Income. He/She can either reinvest in the company so it becomes more profitable or cashes out(dividend).