Texas Real Estate Brokerage Sales Apprentice Education (SAE) Practice Exam

What is the primary purpose of revenues in a business?

1. To cover operational expenses

2. To reflect the company’s cash position

3. To hire employees

4. To increase shareholder equity

The correct answer is: To cover operational expenses

Revenues are fundamentally the income generated from normal business operations and primarily consist of sales of goods and services. The primary purpose of revenues in a business is to cover operational expenses, which include costs such as rent, utilities, salaries, and other day-to-day expenses incurred in conducting business activities. Generating sufficient revenue allows a company to successfully fund its operations. If a business can consistently earn revenues that exceed its operational expenses, it not only maintains its ability to pay bills and sustain operations but can also reinvest in growth, pay off debt, and potentially reward shareholders. While other aspects like cash position and shareholder equity may be influenced by revenue, the direct connection of revenue to operational expenses is where its primary purpose lies.