# Revenue vs Net Income  ## Differences Between Revenue and Net Income

Revenue refers to the sum of money which the company generates from doing the business in the normal course of operations from its customers whereas net income refers to the income earned by the company or the income left over in the company after deducting all the expenses of the period from the net revenue.

Revenue and net income are related. If you look at the of a company, the first thing you would see is the gross revenue/sales. This is the product of the number of units the company sold during that year and the selling price per unit. If we deduct the sales discount or/and sales return from the gross sales, we get the net sales/revenue. On the other hand, net income is almost the last item on the income statement if there’s no requirement of calculating earnings per share.

The net revenue is what a company earns as a whole and the net income that the company is left with after bearing all the expenses and adding other sources of income.

For eg:
Source: Revenue vs Net Income (wallstreetmojo.com)

### Example

Let’s say that we have the Gross Revenue of \$110,000 with a sales discount of \$10,000. And we have the cost of goods sold of \$30,000, operating expenses of \$20,000, interests of \$5000, and the taxes of \$15,000. Find out the net income.

Let’s say how it works.

• The first step is to calculate Net Revenue = Gross Revenue – Sales Discount = \$110,000 – \$10,000 = \$100,000
• When we deduct the from the Net Revenue, we get the . Here, the gross profit is = (\$100,000 – \$30,000) = \$70,000.
• From the gross profit, we will deduct the operating expenses. And we will get the operating profit. Here, the operating profit is = (\$70,000 – \$20,000) = \$50,000. This is also called EBIT (.
• From the operating profit, we will deduct the interests, and we will get the profit before taxes (). Here, the PBT would be = (\$50,000 – \$5000) = \$45,000.
• From PBT, we will deduct the taxes, and we will PAT (profits after taxes), which we also call the net income. Here, the net income is = (\$45,000 – \$15,000) = \$30,000.
• If we do a percentage calculation between the net sales and the net income, we will get that the net income is (\$30,000/\$100,000 * 100) = 30% of the net sales or the net revenue.

### Revenue vs. Net Income Infographics

For eg:
Source: Revenue vs Net Income (wallstreetmojo.com)

### Key Differences

• The main difference is the revenue consists of all the expenses and incomes; whereas, the net income consists of only the difference between the revenue and the expenses.
• is the third item on an income statement. The net income is the last item on an income statement.
• The revenue is the superset of the net income. On the other hand, the net income is the subset of the net income.
• The revenue is always more than the net income. The net income is always lower than the revenue.
• The revenue isn’t dependent on the net income. The net income is dependent on the revenue. If there’s no revenue, there would be no net income.

### Conclusion

If you understand how to see an income statement, you will be able to understand the difference between revenue and net income. It may happen that even if the firm has earned revenue, but it has no net income. If and the expenses for a year are similar, there would be no net income. Or if the expenses are more than the net sales, there would be no net income; rather, it would be a .

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