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Modeling Revenue Part 1
When to use
When constructing a basic financial model.
- Key area of model
- Will headline figures be derived (e.g. revenue = unit price x number sold) or simply be input?
- Should calculations have the option to be excluded from certain periods?
- Consider inflation: nominal vs. real
- Nominal Basis
- Actual amounts paid and received
- i.e. dollar amount paid for a product or service at time of purchase
- Real Basis
- Amount that would be paid if inflation did not exist
- e.g. price paid for product today at last year’s levels
- Nominal monies always used for actual transactions but may misrepresent real value
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