Income vs Revenue vs Earnings (2024)

FAQs

What is the difference between income and earnings and revenue? ›

Consider these factors when comparing earnings and revenue and deciding which figure to evaluate: Definition: Revenue is the total money a business receives, while earnings refers to the remaining money after expenses. Use: Analysts use revenue to determine income, while they use earnings to determine profit.

Net income and revenue are equally important metrics for business managers. Net income measures the company's profitability and is an indicator of efficiency and financial health. Revenue measures the company's ability to generate sales and is an indicator of business size and potential growth.

While revenue is the total earned from sales or other sources, income is the profit earned after accounting for all expenses. Understanding the difference between revenue vs income is crucial for making informed financial decisions, such as budgeting, investing, and pricing strategies.

You would use three formulas throughout the income statement: Step 1: Gross profit = net sales – cost of goods sold. Step 2: Operating income = gross profit – operating expenses. Step 3: Net income = operating income + non-operating income.

Types of revenue include:

The sale of goods, products, or merchandise. The sale of services, such as consulting. Rental income from a commercial property (notice the use of “income”) The sale of tickets to a concert.

Revenue is the amount of money a company earns from typical business operations, like sales. Unlike income and profit, revenue doesn't incorporate business spending. To calculate income, subtract business operation expenses from company revenue.

While there is no universally defined percentage for a "good" Payroll to Revenue Ratio, a commonly cited guideline is that labor costs should ideally account for 15-30% of total revenue.

There are rare exceptions. Say the business received a big one-time payment for the sale of an investment property. (That is, the transaction is not strictly revenue from the core business.) The payment might be big enough to skew the earnings number higher than the revenue number.

Profits and earnings are often used interchangeably, but they are different. Overall, these terms are primarily differentiated by the adjectives that precede them. For example, net earnings, or gross profit. The term earnings is most commonly used when discussing the bottom line of a company's income statement.

The basic revenue definition is the total amount of money brought in by a company's operations, measured over a set amount of time. A business's revenue is its gross income before subtracting any expenses. Profits and total earnings define revenue—it is the financial gain through sales and/or services rendered.

Is net turnover the same as revenue? ›

Turnover and revenue are often used interchangeably, but they have slightly different meanings. Turnover refers specifically to the amount of money generated by a company from its operations, while revenue can refer to any income generated by the company, including non-operational income such as investments.

Earned income includes wages, salary, tips and commissions. Passive or unearned income could come from rental properties, royalties and limited partnerships.

Cost of goods sold (COGS) refers to the direct costs of producing the goods sold by a company.

Unearned revenue is not recorded on the income statement as revenue until “earned” and is instead found on the balance sheet as a liability. Over time, the revenue is recognized once the product/service is delivered (and the deferred revenue liability account declines as the revenue is recognized).

At a basic level, the cost of goods sold formula is: Starting inventory + purchases − ending inventory = cost of goods sold.

The Bottom Line

These two figures are often used synonymously because they refer to money a company earns. However, revenue refers to money earned from a variety of sources, while income is any money left over after all expenses are accounted for, including taxes and other costs.

Earnings and income both refer to a company's bottom line: the amount of profit left over after paying all expenses. Income can be designated as gross vs. net, or by source such as interest income vs. income from operations.

Annual income is the total amount of money you or a business earn during a fiscal year. For individuals, it includes salary before deductions like taxes and retirement contributions.

Earned income includes all the taxable income and wages from working either as an employee or from running or owning a business. It also includes certain other types of taxable income. Earned income includes: Wages, salaries, tips and other taxable employee pay.