Final answer:
Net revenue is calculated by subtracting allowances for bad debt, warranty, and returns from the gross revenue, providing a more accurate picture of a company's financial performance.
Step-by-step explanation:
When calculating the net revenue, you start with the gross revenue and then subtract any allowances for items such as bad debt, warranty, and returns. These allowances are deductions that reflect estimated losses or costs due to customer returns, faulty products, or unpaid receivables. After accounting for these factors, you are left with net revenue, which gives a more accurate picture of the actual income that is expected to be received by the company. This is an important figure in financial reporting and helps stakeholders understand the company's true financial performance.