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 often called the top line because it’s located at the top of an income statement. When a company is said to have “top-line growth,” it means the company’s revenue—the money it’s taking in—is growing. While a company with robust revenues may show it can sell its product or service, a business with high profits is likely more financially sound.

In Revenue vs. Income, revenue is the total amount of money a company makes from its business, i.e., by selling a product or service. In contrast, income is the amount left after removing all the expenses (rent, labor, etc.) from the revenue. Net revenue refers to gross or total revenue minus any discounts, price adjustments or returns. While net income refers to the company’s bottom line profit after accounting for all expenses. Monthly financial statements and reports will give you a clear picture of how your business is doing. Because it gives a picture of how efficient a company is regarding spending and managing operating costs, net income is considered the all-important measure of profitability.

• And there needs to be a clear understanding of all the different expenses that must be deducted in order to get to the bottom line.
• The U.S. has a multitiered income tax system under which taxes are imposed by federal, state, and sometimes local governments.
• 5.In a financial statement, “revenue” and “income” are placed at different venues.
• While both measures are important and that income is derived from revenue, income is generally considered more important.
• If, during a particular time period, you also sell off a warehouse you are no longer using, the proceeds of that sale would not count towards operating revenue.

This overview will help you distinguish between revenue and income and help you understand how they differ. Companies can grow their net income and EPS by cutting costs, even if revenues are flat or decreasing. The investing community often focuses even more on earnings per share (EPS), which is net income divided by the number of shares outstanding.

Main Differences Between Income and Revenue

Commonly watched margins include the gross margin, operating margin, profit margin, EBIT margin, and EBITDA margin. Bottom-line growth and revenue growth can be achieved in various ways. A company like Apple might experience top-line growth due to a new product launch like the new iPhone, a new service, or a new advertising campaign that leads to increased sales. Bottom-line growth might have occurred from the increase in revenues, but also from cutting expenses or finding a cheaper supplier.

• When a company earns something, it is called revenue, and when the cost and expenses of production and selling process are deducted from the revenue, it is known as Income.
• The cost of goods sold is listed next, followed by other expenses such as selling, general and administrative expenses, depreciation, interest paid and taxes.
• A sales allowance is an amount subtracted from revenue which are refunds for damaged, defective, or incorrectly shipped items.
• What employees then receive is the remainder after all deductions.
• It refers to the amount of money an individual or entity earns after deducting expenses and taxes.
• They use these metrics to evaluate a company’s financial performance and make investment decisions.

In the course of doing business, the company incurs various expenses. E.g. raw material for shirts (cloth, buttons etc.), purchase and upkeep of machinery, personnel costs and other capital and operational expenses. Let’s say the total expenses in 2011 for this business were $8 million. So the income, or net profit, for this company in 2011 is $2 million. Operating revenue refers to the revenue generated from the company’s primary business activities.

The proceeds from these activities are seldom referred to as government sales. However, total revenue for a period may occasionally be smaller than total sales. However, there are many small differences between the two financial concepts. Each of these types of profits has relevance, hence their existence. It shows the full image of a company’s cash flow and includes all the expenses. Income refers to the net earnings after deducting all the company, enterprise, individual, or country expenses during a financial year.

What Is Income?

But, only a look at net income as well will provide the true picture – a company that is selling a lot but also has huge expenses is not going to be turning much of a profit. Revenue is the total amount of money earned by a company for selling its goods and services. Companies usually report their revenue on a quarterly and annual basis in their financial statements.

Can income be higher than revenue?

A company’s income refers to the profit earned by it after deducting all the costs and expenses of a financial year. It is also known as the “Net profit”, “Net income”, or “Bottom line” of a company’s financial statement. Companies must factor in a number of expenses to run a business, and sometimes these costs exceed revenues, resulting in lower operating income and profit.

Revenue vs. Income: An Overview

Revenue is calculated by multiplying the price to the number of units sold. In 2018, Walmart earned $515 billion in revenue, making it the world’s highest-earning company that year. Once all expenses were accounted for, the company’s net income was only $6.67 billion. This huge disparity between revenue and income illustrates just how important it is to differentiate between the two terms and how big of an impact costs can have on a company’s bottom line.

How is income calculated?

Earnings, by contrast, reflect the bottom line on the income statement and are the profit a company has earned for a period. The earnings figure is listed as net income on the income statement. When investors and analysts speak of a company’s earnings, they’re talking about the company’s net income or profit. The discipline of economics takes income and revenue into a wider and bigger picture. Economics looks at the revenue and income of a whole industry or a whole country.

In accounting, revenue is termed the “top line” because it’s at the top of the income statement. Net income is called the “bottom line” because it’s at the bottom. For a company that makes its money by selling things, the terms sales and revenue are identical and used interchangeably. For an individual, income is the total money earned, including salaries, tips, interest, dividends, and others.

Apple posted $99,803 billion in net income (earnings) for 2022 (a $5 billion increase from the same period in 2021). Effectively managing costs against revenues will determine whether a company will have positive earnings (a profit) or a loss. A company’s sales indicate the performance of its core business operations, while its revenue may be padded with one-time events like sales of property. Governments use the term revenue to describe the money they collect from taxes, fees, fines, and publicly-operated services. A company reporting “top-line growth” is experiencing an increase in either gross sales or revenue or both. Revenue is the total income a company generates by the sale of goods or services that can be attributed to the company’s core operations.

When a company has healthy revenues and operating income, this results in stronger operating margins. However, what is considered a strong operating margin often varies across different industries. Understanding revenue-income dynamics helps demonstrate a broader understanding of operational efficiency to investors. Net income is calculated by subtracting operating expenses from total revenue. This “bottom line” number is a key metric for businesses, as it shows how much profit they are making.

However, they differ considerably regarding those rates and how they’re applied—and by the type of income that is taxable and the deductions and tax credits allowed. In basic terms, there’s a gigantic distinction between revenue and income. Regardless of whether what is unearned revenue definition and meaning many individuals use them reciprocally, assuming you ask a person who has concentrated on finance, one would let you know that revenue is a higher perspective. Interestingly, income shows the monetary bearing or financial direction of an organisation.