Business revenue is money income from activities that are ordinary for a particular corporation, company, partnership, or sole-proprietorship. For some businesses, such as
manufacturing or
grocery, most revenue is from the sale of goods. Service businesses such as
law firms and
barber shops receive most of their revenue from rendering services. Lending businesses such as
car rentals and
banks receive most of their revenue from fees and interest generated by lending
assets to other organizations or individuals. Revenues from a business's primary activities are reported as
sales,
sales revenue or
net sales. Sales revenue does not include
sales tax collected by the business.
Other revenue (a.k.a. non-operating revenue) is revenue from peripheral (non-core) operations. For example, a company that manufactures and sells automobiles would record the revenue from the sale of an automobile as "regular" revenue. If that same company also rented a portion of one of its buildings, it would record that revenue as "other revenue" and disclose it separately on its income statement to show that it is from something other than its core operations. The combination of all the revenue-generating systems of a business is called its
revenue model.
Accounting terms •
Net sales =
gross sales – (customer discounts, returns, and allowances) •
Gross profit =
net sales –
cost of goods sold •
Operating profit =
gross profit – total
operating expenses •
Net profit =
operating profit – taxes – interest •
Net profit =
net sales –
cost of goods sold –
operating expense – taxes – interest •
EBIT =
net profit + taxes + interest •
EBITDA =
net profit + taxes + interest + depreciation +
amortization Accounting While the current IFRS conceptual framework no longer draws a distinction between revenue and gains, it continues to be drawn at the standard and reporting levels. For example, IFRS 9.5.7.1 states: "A gain or loss on a financial asset or financial liability that is measured at fair value shall be recognised in profit or loss ..." while the IASB defined IFRS XBRL taxonomy includes OtherGainsLosses, GainsLossesOnNetMonetaryPosition and similar items.
Financial statement analysis Revenue is a crucial part of financial statement analysis. The company's performance is measured to the extent to which its asset inflows (revenues) compare with its asset outflows (
expenses).
Net income is the result of this equation, but revenue typically enjoys equal attention during a standard
earnings call. If a company displays solid "top-line growth", analysts could view the period's performance as positive even if earnings growth, or "bottom-line growth" is stagnant. Conversely, high net income growth would be tainted if a company failed to produce significant revenue growth. Consistent revenue growth, if accompanied by net income growth, contributes to the value of an enterprise and therefore the
share price. Revenue is used as an indication of earnings quality. There are several
financial ratios attached to it: • The most important being
gross margin and
profit margin; also, companies use revenue to determine
bad debt expense using the income statement method. • Price / Sales is sometimes used as a substitute for a
price to earnings ratio when earnings are negative and the P/E is meaningless. Though a company may have negative earnings, it almost always has positive revenue. •
Gross margin is a calculation of revenue less the
cost of goods sold, and is used to determine how well sales cover direct variable costs relating to the production of goods. • Net income/sales, or
profit margin, is calculated by investors to determine how efficiently a company turns revenues into profits. == Government revenue ==