Econ Grapher

Sales

What is Sales?
Sales is a measure of the amount of goods or services bought/sold. In the economic and financial market sense sales is a metric that is often reported on and is keenly watched due to its importance in an economy and for enterprises. In the macroeconomic sense sales in most countries is regularly reported in retail sales surveys, this gives a gauge of the state of the economy, particularly in the consumer spending sector (i.e. the Consumption part of the GDP equation). For individual firms, sales reports are of vital importance as they are in essence revenue and life-blood of the business. Sales flow through to profits after subtracting off cost of sales and variable expenses, as well as fixed and operational costs; and of course this flows through into earnings per share in the case of companies. 

How does it relate to Markets?
Sales are of utmost importance in the equity markets, as explained above sales flows through to profits; which flow into earnings per share - which is ultimately the return that shareholders earn. Sales - through earnings can then be applied to dividends for shareholders, or retained for investment, debt reduction, share buy-backs, or acquisitions. Sales obviously also flow through into valuations via price to sales ratios, and of course in the form of earnings through to the P/E ratios. Sales will also be factored into discounted cashflow models and valuations. Wider macro-economic sales reports are of vital importance to the markets and these reports will move the market e.g. better than expected sales will likely boost the overall markets, and sector specific rises will boost sectors of the markets. 

Sources and further reading:
US Census Bureau - Definition of terms
Investor Words - Sales
Wikipedia - Sales (Accounting)

Graph Library:
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Original Source: http://www.econgrapher.com/encyclopedia-sales.html

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