Revenue vs Earnings

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 simple terms, revenue is the income a business generates when it provides a service or a product 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 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-vs-Earnings

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Formula

  • 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 vs Earnings Infographics

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Key Differences

  • 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 associated with 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.

Comparative Table

Basis for ComparisonRevenueEarnings
1. MeaningIncome generated from a business when a service or a product is sold;The bottom line profit after excluding the expenses of a business from their business activities or operations;Activities Or Operations;Operating activities generate the majority of the company's cash flows since they are directly linked to the company's core business activities such as sales, distribution, and production.read more
2. What it’s all about?It’s about the income of the firm.It’s about the profit that a firm makes.
3. MeasurementRevenue measures the income generation of business.Earnings measure the profit of a business.
4. CalculationBy multiplying no. of units to the price per unit;Revenue minus the expenses, taxes, or amortization;
5. ImpactWhen 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 withThe 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.The Income Statement.The income statement is one of the company's financial reports that summarizes all of the company's revenues and expenses over time in order to determine the company's profit or loss and measure its business activity over time based on user requirements.read more
7. How much is its preference?The preference is lower.The preference is much higher.

Final Thoughts

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. Whereas, earnings are 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 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 companyBottom Line Of The CompanyThe bottom line refers to the net earnings or profit a company generates from its business operations in a particular accounting period that appears at the end of the income statement. A company adopts strategies to reduce costs or raise income to improve its bottom line. read more.

Revenue vs. Earnings Video

 

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