ShmoopTube

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Accounting Allah shmoop the devil in the revenue details Okay

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we're deep in the feathers of pillow talk The little

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company that could Well farmer Kenny Rooster Land started it

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You know old MacDonald guy with just nice soft pillows

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Then Morten and Milton came along from Apple and had

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the grand idea tto add speakers into the pillow with

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accompanying iPhone APS with the result of fast growing now

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global ish company that's putting the whole world to sleep

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But in a good way So then what's the real

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difference between revenues here and sales Check out the guts

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of our revenues derivation math here noting that units are

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in the thousands Which brings us to a nicely growing

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company going from forty one million in two thousand eighteen

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Sixty one point seven in nineteen to ah one o

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five point eight in twenty twenty where hindsight is awesome

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Yeah these were just the pillow sales They're on a

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normal income statement All you would get are the three

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total revenue lines But note how little of a true

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story that would then tell about thie actual growth drivers

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of the business without knowing the above detail you would

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have no idea what was really contributing to the profit

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growth of the company Well if we inspect the numbers

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we note that the overall company's growing and something like

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fifty percent a year in revenues thes lines down there

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But the basic business of selling pillows threw the wholesale

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channel to places like Nordstrom and Macy's And Amazon is

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only growing in the mid teens Percentages Well conversely sales

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directly from pillow talk dot com where the company takes

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a credit card PayPal or BITCOIN is payment well that

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growth is happening at well over one hundred percent But

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pricing is declining from the website where it's growing slightly

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from the wholesale channel Well why would this be The

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case isn't an odd Well you can imagine that Macy's

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and the others are slowly dying Dinosaurs were only old

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people shop anymore As a result the company is able

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to flex its brand muscle and charge a higher price

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to those stores who are hungry to be selling hip

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new products rather than products For people who you know

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need new hips Note also that the pillow APS air

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just a five dollar download from iTunes There's almost no

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marginal cost to the company and this business seems to

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be growing nicely although not amazingly fast by Internet standards

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Well the guts of the analysis of these revenue drivers

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are what comprises the difference between men and Jerry alot

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accounting and simply financial accounting A manager would look at

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these numbers and wonder why sales of pillow APs are

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growing at a much faster pace that also likely be

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wary of the wholesale channel knowing that many of its

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distribution partners like Sears Pennies Kmart and others will soon

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go entirely bankrupt and close their doors So the manager

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would be aggressively trying to find a replacement distribution venues

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When those companies go you know six feet under Right

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Like think about what happened in Mattel and Barbie when

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Toys R Us went bankrupt Well financial accounting on the

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other hand wouldn't really care They would just add up

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the numbers correctly present them to a manager and gap

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compliance with all the footnotes and other items itemized And

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then they'd go play golf structurally Every accountant can look

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at this company and be like they're doing well Get

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me some of them Stock options pronto Revenues are growing

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at a nice clip Profit margins are increasing and the

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business mix is heading in the right direction with a

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shift to lots of high margin APP sales and away

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from low margin pillow sales and a huge increase in

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sales or distribution directly off the company's own websites instead

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of through Macy's and the gang While the whole scenario

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bodes well for a big need for tax accountants to

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take a gander here lots of profit to be taxed

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in the future and that's a problem albeit well a 00:03:35.735 --> [endTime] good one

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