Revenue / Gross Income

The amount of money a company receives during a specific period, including discounts and deductions for returned merchandise, calculated by multiplying the price at which goods or services are sold by the number of units or amount sold. In short, revenue is the money a company brings in before any expenses are deducted.

The terms “revenue” and “income” are often used interchangeably, but they have different meanings in a business context. Because it is the calculation starting point and therefore sits at the top of a company’s balance sheet, revenue/gross income is often referred to as the company’s “top line.” If a company has experienced top-line growth, it means that overall revenues are higher. This is in contrast to a company’s bottom line, which is the total net income after expenses and other financial obligations have been paid.

Growing business revenue requires bringing in more money (through increased sales, new products, etc.). While top-line growth can be responsible for bottom-line growth (net income), there are other ways to increase a company’s bottom line. Spending less and increasing efficiency are two methods for bottom-line growth that don’t require higher revenues/gross income.

 

EXAMPLE:

This concept is akin to the world of personal finance. If you get a better-paying job or an additional job, you are increasing gross income or revenue. If your expenses and spending stay exactly the same, the extra revenue will result in a higher net income. But you can also increase your bottom line (net income) by cutting out unnecessary spending or finding a cheaper place to live.

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