Revenue the line blood to a business.
What is Revenue or Sales?
Revenue is the monetary amount a company earns from the sale of its products or services to customers or their clients before deducting associated expenses. A company’s revenue is shown on the first line of its income statement as sales revenue or service revenue. The formula for calculating revenue is shown below:
Sales Revenue = Sales Price * Number of Units Sold
Revenue vs. Net Income
Revenue is often referred to as the top line because it is at the top of the income statement whereas net income is referred to as the bottom line due to the net income line being at the bottom of an income statement [1]. Revenue and net income will most likely vary drastically due to expenses being deducted from revenue to derive net income. An example is shown below:
- Revenue from brick-and-mortar store: +$50,000
- Cost of goods sold: -$20,000
- Expenses (payroll, marketing, etc.): -$14,500
- Net income: $15,500
After calculating net income, the company’s net income was 31% of its total revenue. This net income is the amount of profit the company made within the accounting period after paying wages, rent, marketing, costs to produce the goods or service, etc.
Revenue in Business
Revenue is the backbone to running a business. Without revenue, businesses can’t continue to operate and cease to exist. As companies increase year-over-year revenue, they will be able to grow and expand their company and strive for being a public company.
