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Volume, realisation, and revenues explained

Volume, realisation, and revenues explained

Don’t judge a book by its cover and a company’s books of accounts by its revenue! Along with revenue, realization and volume are also important factors to consider while investing. To understand what these terms mean, watch our engaging and easy-to-understand video from the #LearnWithUpstox series.

Hello and welcome to our series - Learn with the Upstox.

In this series, we will talk about some key aspects of fundamental analysis, corporate actions, and some important general concepts about the stock market. 

In this article we will talk about some key concepts about the company’s sales. 

So, let’s get cracking!

What are sales volume, realisation and revenue?

A crucial aspect to consider every time you buy a share is how the company is doing in terms of revenue.

But, will a revenue figure be able to tell us everything? 

The three aspects that paint a detailed picture of the company’s sales are the Volume, Realisation and Revenue. Now, let’s see how they are interconnected.

Consider this example of Hero Motocorp. Assume that Hero sold One Lakh bikes this month. This says that the volume (total units sold) for this month was One Lakh in the bikes segment. Say, on average they earned Rs 45,000 per unit. This says that the realisation (Average revenue per unit) was Rs 45,000 per unit.  When you multiply these, you get the revenue which is Rs 450 crores. 

Why are Volume, Realisation and Revenue important?

The reason we use these metrics is:

  • To understand how much a company is making for every unit it sells. 
  • It gives us a clearer picture of the margins involved.
  • And it helps us analyze sales data for a given period.

It always makes more sense to dig deep and check this data over just revenue figures as you’ll understand more about every company and end up picking a better stock for your portfolio.

And that’s it for now. If you liked this article and want to learn more, feel free to browse through our blog as we have this entire series dedicated to helping you invest. In fact, you can also check out our YouTube channel for the same. 

Thank you and have a great day!