Revenue
Candlefocus EditorRevenue includes all money earned during a given period, including cash, credit, and other forms of payment. It forms the basis of the calculation of income or the bottom line. Income is calculated through a simple equation: Revenue minus expenses equals income. It is important to note that operating income is used to assess the performance of a company, and includes the full costs associated with generating the revenue. Operating income is used to measure the core performance of a business’s operations. For example, if a company generated $300,000 in revenue from its core operations, but had to spend $200,000 in costs related to those operations, then its operating income would be $100,000.
Non-operating income is slightly different from operating income and is generated from ancillary sources or secondary activities, such as investments, contracts, and grants. Non-operating income does not reflect the success of the core operations of a business and can be highly volatile.
It is also important to note that revenue only includes money generated from sales, while income or profit includes the costs associated with generating that money as well. Businesses must deduct any expenses related to generating its revenue prior to calculating its income. This allows investors, regulators, and other stakeholders to better assess a company’s financial performance.
In summary, revenue is one of the most important items to consider when assessing the financials of a company. It forms the basis for calculating income, which indicates if an organization is making a profit or a loss. Revenue typically does not include all expenses associated with generating it, and non-operating income is generated from sources outside of the core business operations. Investors, regulators, and other stakeholders use revenue and income to determine the success of the business.