Sales: definition, issues and explanations

Sales (Sales) correspond to the total amount of sales of goods or services made by a company over a defined period, generally an accounting period.

It is a fundamental figure that expresses the gross value generated by business activity, before deduction of expenses or taxes.

Sales are often used as an indicator of a company's size and activity, and appear in the detail of the income statement, Management and Finance category.

Sales are essential for measuring a company's commercial performance. It makes it possible to track the evolution of sales over a given period.

It is also used to estimate the company's capacity to generate income and finance its current operations.

Sales are a key tool for managers, investors and financial partners as they provide information on the company's economic dynamics and competitiveness.

Sales are calculated by adding together the selling prices of all goods and services sold during a period.

It includes clearly realized sales, exclusive of tax, but may include or exclude certain discounts and returns depending on the accounting rules applied.

Concretely, to obtain sales, we need to take into account:

• the volume of sales made,
• the unit price of each product or service,
• any adjustments such as discounts, rebates or returns.

Advantages:

• Easy to calculate and interpret.
• Clear indicator of the company's commercial dimension.
• Allows early warning of a drop in activity.

Disadvantages:

• Does not take into account profitability (profits or losses).
• Can be influenced by exceptional or non-recurring items.
• Does not always reflect the company's complete financial health.

A retail company calculates its sales by adding up the total sales of products during a year.

For a service company, sales correspond to the amount of invoices issued for services rendered.

Financial analysts use sales to compare the growth of companies in the same sector and to make investment decisions.

• Public Service - Turnover
• INSEE - Economic definitions
• La Finance Pour Tous - Turnover