Difference Between Revenue and Earnings
The key difference between Revenue and Earnings is that revenue refers to the amount generated by any business entity by selling their goods or by providing their services during the normal course of its operations before deducting the expenses, whereas, the earnings refers to the earnings generated by any business entity after deducting the cost and expenses incurred during the period.
Revenue is also synonymous with income, which is what a firm generates from their daily business activities. In the most simplistic terms revenue is the income generated from a business when a service or a product is provided to a consumer.
Earnings, on the other hand, are the inflow of money after all the expenses i.e. profit from a business in their daily operations. It is basically the amount earned by a business from their day to day activities. It can be achieved by a product sold or a service availed by a customer.
- Revenue is calculated as the number of units of goods (or products) sold * price per unit.
- Earnings are the amount remaining after taking out the expenses or the amount of depreciation of the underlying asset.
It can also be stated that Revenue – Expenses = Earnings, assuming the expenses are less than revenues the company will have a profit.
It can also be derived that if expenses are more than revenue, there will be a net loss, which a company may have to suffer.
Revenue vs Earnings Infographics
- Revenue is the ability of the firm to use generate income and to earn better returns. Earning, on the other hand, is the profit of the firm by doing daily business activities.
- Revenue is related to the top line of the company. Earning is related to the bottom line profits of the company.
- Revenue can be calculated by multiplying no. of units to the price per unit. Earnings can be calculated as the difference between revenue and expenses, taxes, depreciation expense, or interest paid.
- Revenue denotes the operating income. Earning, on the other hand, denotes financial profitability.
- Revenue is of lower preference; however, it does help to identify the profitability of the firm. Earning is given much higher preference by companies as it is an inflow to the firm and adds to the profitability of the firm.
|Basis for Comparison||Revenue||Earnings|
|1. Meaning||Revenue can be defined as income generated from a business when a service or a product is sold.||Earnings can be defined as the bottom line profit after excluding the expenses of a business from their business activities or operations.|
|2. What it’s all about?||It’s about the income of the firm.||It’s about the profit made by the firm.|
|3. Measurement||Revenue measures the income generation of business.||Earnings measure the profit of a business.|
|4. Calculation||Revenue can be calculated by multiplying no. of units to the price per unit.||It can be calculated as Revenue minus the expenses, taxes or amortization.|
|5. Impact||When the degree of revenue is medium, it depicts more income and inflow for the firm and vice versa.||When the degree of earnings is higher, it depicts more profit or gains for the firm and vice versa.|
|6. In relation with||The degree of revenue is usually medium as it does not account for expenses in the income statement.||Earning has a direct relationship with the profit and cash gains in the income statement.|
|7. How much it is preferred?||The preference is lower.||The preference is much higher.|
Revenue and Earnings are both important in their respective terms. And they both are related to the company’s inflow of cash or liquidity, which helps the company decide whether the company has gains or losses after calculating the net income and net earnings.
For instance, there is a pharmaceutical store and you were to define the revenue and earnings for the store. Revenue is what you get from people buying medicines from the store and earnings is the profit that you derive after reducing all the costs (expenses and taxes) involved to purchase those medicines and generate income eventually.
So the question for a firm is answered simply, are the revenue and earnings the same? The answer is No. Using them is the most basic way to know and improve the money inflow of the company during a particular period and define the top and bottom line of the company.
Revenue vs Earnings Video
This has been a guide to Revenue vs Earnings. Here we discuss the top differences between revenue and earnings along with infographics and comparison table. You may also have a look at the following articles for gaining further knowledge –