A blooming total revenue attests to an ultra-efficient sales department excellent at finding and winning new business. Your income, on the other hand, tells you how well you’re able to mesh your ability to sell into a sustainable approach to running your company. The “top-line” or “revenue” of a company is the total amount of money brought in by a company. This total is represented on an “income statement”, which is a document that has a complete calculation of all money that comes in and goes out of a business.

Different businesses use different measurements for both revenue and net income. Each figure includes varying factors and has a different level of relevance for a particular company based on its industry and how it operates. While these are ordinary small business expenses, they don’t all apply to all companies. Applicable expenses for your business depend on its size, your company type, the industry you operate in, and your specific accounting practices.

Revenue vs. Sales: An Overview

A company’s financial statement includes its balance sheet, income statement, and cash flow statement. Revenue and income represent different aspects of a company’s finances. A detailed analysis of your company’s revenue vs its income provides a more accurate picture of its profitability. Revenue is determined by multiplying the price of a product or service by the number of units sold.

Our mission is to empower readers with the most factual and reliable financial information possible to help them make informed decisions for their individual needs. Our goal is to deliver the most understandable and comprehensive explanations of financial topics using simple writing complemented by helpful graphics and animation videos. Our team of reviewers are established professionals with decades of experience in areas of personal finance and hold many advanced degrees and certifications. TestDome has loved FastSpring’s product and support for a long time. A P/E ratio below 15 is cheap, whereas a ratio above 18 is expensive. Therefore, an optimum P/E ratio ranges between 15 and 18, but a lower P/E ratio attracts more investors.

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Revenue and income are two very important financial metrics that companies, analysts, and investors monitor. Now, after discussing the three terms, it is quite clear that they do not contradict instead they arise one after other. The never ending business activity starts with the arrival of revenue from which profit is realized in the form of financial benefits to the company.

The difference between revenue and income is that revenue represents the total amount of money generated by a business before subtracting expenses. Income is the total profit that a business has after all the expenses are deducted from the revenue. Another distinction between the two is their placement in a company’s financial statement. Sometimes these placement terms are used instead of both “revenue” and “income” in business communications. On the other hand, “income,” also known as “net profit,” is the money left for a business after it subtracts costs and expenses from its revenue.

What is the difference between revenue and income?

Operating income and revenue both show the money that a company makes. However, the two numbers are different ways of expressing a company’s earnings, and they have different deductions and credits involved in their calculations. The main difference is that revenue is a company’s income before deducting expenses, while operating income represents the profit after subtracting expenses.

Income vs. Revenue

It gets calculated when the preferred stock dividend is deducted from the net profit of the business. It is the residual amount (positive) left with the company which can either be held by the company as retained earnings or distributed among the equity shareholders as the dividend. It can also be said that it is the net rise in the equity shareholder’s fund. By subtracting these costs, you will have created your operating profit. This calculation is also known as earnings before interest and taxes (EBIT).

Tax documents

The basic meaning of income is the amount of money an individual or an organization receives for selling goods, providing services, or investing capital. For example, as an employee in a company, income is the wage the individual earns for work rendered. Additionally, they may earn a side income from an investment portfolio of financial assets (e.g., stocks, bonds, etc.). Note that the tax regulations regarding income types may vary among tax jurisdictions.

An income statement is a document that has the complete calculation from revenue down to income. We also need to consider the expenses the company incurred to generate its revenue. If the company’s revenue is greater than its expenses, it will have a profit. On the other hand, if a company’s expenses are greater than its revenue, it’s operating at a loss. The difference between revenue and sales is relevant to investors viewing company reports.

Revenue vs. Earnings Example

SaaS has transformed how businesses operate, offering a cost-effective and flexible alternative to traditional software. The pizza company, Tom’s, provides customers with the option to pay with cash or credit. Apple (AAPL) posted a top-line revenue number of $394.33 billion for 2022. She has held multiple finance and banking classes for business schools and communities. In this article, we’ll explain what income is, what revenue is, and the difference between the two. Someone on our team will connect you with a financial professional in our network holding the correct designation and expertise.

Hopefully, the examples above have provided a clearer view of how a company reports certain items, and the difference between top line and bottom line is a little clearer. Read through each case below and see if you can determine what you would categorize it as. Explore calculate markup the key fundamentals of SaaS products and common reasons for their failure. Dive into the importance of cultural focus, simplified pricing, and why SaaS is all about the Product. Cost of Goods Sold is any expense that directly creates the product or the service.

It refers to the amount of money an individual or entity earns after deducting expenses and taxes. It’s a crucial financial metric that can provide insights into an individual’s financial health and overall earning potential. In accounting terms, income is recognized when it is earned, regardless of when payment is received.

Nonoperating revenue is the money that a business earns from side activities unrelated to its daily activities, such as profits from investments or dividend income. This type of revenue is generally less consistent than operating revenue. Revenue is the total amount of money a company generates from its core operations.