Marginal revenue is the amount earned by a company when they sell an additional unit of products. There is always a marginal cost attached to it, which should be accounted for in financial analysis. The formula for calculating marginal revenue is: Marginal Revenue = Change in Revenue / Change in Quantity The concept can be further examined using a curve. When we graph the marginal revenue using quantity as the x-axis and price as the y-axis, we would expect the curve to slope downwards. This is explained by the law of diminishing margin, which states that as a company sells more products over the normal limit, the price of its products would also need to go down to drive demand (quantity).
Using This Excel TemplateThis Excel calculator is a simple and easy-to-use tool to help accounting beginners calculate the financial figures by inputting the required data. Enter your inputs in the cells with blue font (common practice in financial modeling), then your outputs will be generated in the cells with black font.
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