Answers the Question
How much revenue did we make by selling items?
Calculator for Net Sales
What Is the Net Sales?
This formula provides insights into how much customers are buying.
Why Is it Important?
- Although this formula doesn't provide good insight into profitability, it may provide information about customer demand. In the case of a startup, "traction" may prove of vital importance as costs can be reduced over time.
Formula(s) to Calculate Net Sales
- NET SALES = GROSS SALES - RETURNS - ALLOWANCES
- Thinking that net sales is only about the income from items sold. Discounting and returns can wildly change the value of the net sales formula.
- Confusing net sales with profitability. Net sales does not take fixed assets and variable costs into account.
- Numbers can be goosed by untrustworthy companies that inflate their sales numbers.
- Considering the formula only in a static context. Trends are also very important.