Business

Difference Between Revenue and Profit

ADVERTISEMENT
CONTINUE READING BELOW

Main Difference

The main difference between Revenue, and Profit is that Revenue only deems the amount of income a business originates through the sale of its goods or services whereas profit is the figure of income that remains after all expenses, costs and taxes accounted for.

Revenue vs. Profit

Revenue is the dividing line of the income description whereas the profit is the bottom line. While revenue comprises the gross earning from primary operations (without any deductions), profit is the resultant income after accounting for expenses, expenditures, taxes.

Comparison Chart

RevenueProfit
The factual amount received by the company through its business activities without any inference is known as revenue.The excess remained after reducing all expenses from the revenue is known as profit.
Categories
Operating Revenue and Non – Operating RevenueGross Profit or return and Net Profit or return
Dependence
Revenue is not dependent or reliance on Income and Profit.Profit is dependent on Revenue.
ADVERTISEMENT
CONTINUE READING BELOW

What is Revenue?

Revenue, or sales, is the income or earning your business receives from business-related activities. For most businesses, most of its revenue derived from sales. You can find your revenue at the forefront of your business’s income statement. To evaluate sales, multiply the price of products or services by the amount you sold. Revenue does not reveal you how much your business has during a period. Profit exhibits you the amount your business gains or loses after you deduct expenses. To calculate your profit or net result/loss, you must use your business’s revenue as a place of start. To find your profit, subtract your whole expenses from your whole revenue. There are two sorts of revenue your business may receive: Operating Revenue and Non-Operating Revenue. The revenue concepts are concerned with Total Revenue, Average Revenue, and Marginal Revenue.

ADVERTISEMENT
CONTINUE READING BELOW
  • Total Revenue: Total revenue is the sum of all sales, receipts or income of a firm.
  • Average Revenue: The average revenue curve shows that the price of the firm’s product is the same at each level of output.
  • Marginal Revenue: Marginal revenue is the change in total revenue which results from the sale of one more or one less section of production.

What is a Profit?

Profit is the proceeds remaining after all costs paid. These costs include labor, materials, interest on the debt, and taxes. Profit usually used when describing the business activity. But everyone with an earning has profit. It’s what’s left over after paying off the bills. Profit is the recompense to business owners for investing. In small companies, it’s repaid directly as income. In corporations, it often paid in the shape of dividends to shareholders. When expenditure is higher than revenue, that’s called a loss. If a company endures losses for too long, it goes bankrupt. Businesses use three types of profit to review different areas of their companies.

  1. Gross Profit: Deducts variable costs to revenue for each business line. Variable costs are only those required to produce each product, like assembly workers, materials, and fuel. It doesn’t contain fixed costs, like plants, equipment, and the human resources department. Companies collate product lines to see which is most profitable.
  2. Operating Profit: Contains both variable and fixed costs. Since it doesn’t comprise certain financial costs, it’s generally called EBITA. That refers to Earnings Before Interest, Tax, Depreciation, and Amortization. It’s the most often used, especially for service companies that don’t have products.
  3. Net Profit: Contains all costs. It’s the most exact representation of how much money the business is producing. On the other hand, it may be deceptive. For example, if the company generates a lot of cash, and it’s invested in a rising stock market, it may look like it’s doing well.

Key Differences

  1. Revenue divided into operating and non-operating revenue, and profit classified as gross, and net profit.
  2. Without revenue, there is neither profit nor income in the business.
  3. Revenue is the nasty amount, i.e., without any deductions while profit and income derived after deductions of expenses and taxes.

Conclusion

The never-ending business action starts with the arrival of revenue from which profit realized in the form of financial advantages to the company.

ADVERTISEMENT