Revenue vs Net Profit

Revenue

Net Profit

What is it?

Revenue is defined as the income generated through a business’ primary operations. It is often referred to as “top line” and is shown at the top of an income statement.

Net profit is the value that remains after all expenses are subtracted from the company’s total income. It is one of the best ways to determine a business' profitability and is often referred to as the bottom line.

Who is it for?

Chief Financial Officer

Chief Revenue Officer

Sales Manager

Chief Financial Officer

Financial Analyst

Accountant

Formula

ƒ Sum(Revenue)

ƒ Sum(Total Revenue) - Sum(Total Expenses) + Sum(Other Revenue) - Sum(Other Expenses)

Example

If a customer signs an annual contract for $12,000 consisting of monthly payments, then the revenue for each month of that year is $1,000, and the revenue for that year is $12,000.

A software company sells software and ongoing product maintenance. They earned $3M of Revenue in the fiscal year. In the same year, the company sold a pile of office furniture which netted a gain on disposal of assets in the amount of $0.5M. All other annual costs, such as salaries, wages for seasonal contractors, commissions for agents, office rent, utilities, software subscriptions, office supplies, income tax, and interest costs totaled $1.5M. The Net income for this company for the current fiscal year is $2M: $3M Revenue - $1.5M OPEX + $0.5M Gain on assets.