DECA Sports and Entertainment Marketing Practice Exam

What is the formula for calculating gross revenue?

1. Sales minus expenses

2. Income from sales before deductions

3. Revenue minus costs

4. Sales plus taxes

The correct answer is: Income from sales before deductions

The formula for calculating gross revenue is indeed expressed as income from sales before deductions. This definition accurately reflects that gross revenue encompasses the total amount generated from the sale of goods or services, without accounting for any expenses, returns, or allowances. Understanding gross revenue is crucial as it provides a foundation for evaluating a business's financial health. It allows businesses to gauge their sales performance and is a critical starting point in assessing profitability when other costs and deductions are eventually considered. In contrast, the other options represent different financial metrics or incorrectly describe gross revenue. For example, sales minus expenses refers to net profit, which accounts for various costs and gives insights into profitability. Revenue minus costs also aligns with calculations related to net or profit margins, which again involve deductions. Additionally, sales plus taxes would not correctly reflect gross revenue, as it misconstrues the nature of revenue calculations and could lead to inaccuracies in financial assessments.