WallStreetMojo

WallStreetMojo

WallStreetMojo

MENUMENU
  • Blog
  • Free Video Tutorials
  • Courses
  • All In One Bundle
  • Login
Home » Accounting Tutorials » Income Statement Tutorials » Revenue vs Net Income

Revenue vs Net Income

By Sayantan MukhopadhyaySayantan Mukhopadhyay | Reviewed By Dheeraj VaidyaDheeraj Vaidya, CFA, FRM

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 income statement 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.

Revenue-vs-Net-Income

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.

Popular Course in this category
Sale
All in One Financial Analyst Bundle (250+ Courses, 40+ Projects)
4.9 (1,067 ratings)
250+ Courses | 40+ Projects | 1000+ Hours | Full Lifetime Access | Certificate of Completion
View Course

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 costs of goods sold from the Net Revenue, we get the gross profit. 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 (Earnings before interests and taxes).
  • From the operating profit, we will deduct the interests, and we will get the profit before taxes (PBT). 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

Revenue-vs-Net-Income

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.
  • Net revenue 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.

Revenue vs. Net Income Comparative Table

Basis for comparison

Revenue (Net Sales)

Net Income

Meaning

We get net sales by deducting the sale return/discount from the gross sales.

We get net income by deducting all the expenses from the net sales.

Position in an income statement

It stands as a third item in an income statement.

If EPS doesn’t need to be computed, net income stands as the last item in an income statement.

Dependence

It is not dependent on net income.

It is completely dependent on the revenue. Without revenue, there can be a net loss. But without revenue, we can’t compute the net income.

Subset

It is the superset of the net income.

It is the subset of the revenue.

More/Less

It is always more than the net income.

It is always less than revenue.

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 the net sales 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 net loss.

Recommended Articles

This has been a guide to Revenue vs. Net Income. Here we discuss the top differences between revenue and net income with Infographics and comparison table. You may also have a look at the following articles –

  • Operating Income vs. Net Income – Differences
  • Gross Income vs. Net Income
  • Profit vs. Revenue
  • Earnings vs. Revenue
0 Shares
Share
Tweet
Share
Primary Sidebar
Footer
COMPANY
About
Reviews
Contact
Privacy
Terms of Service
RESOURCES
Blog
Free Courses
Free Tutorials
Investment Banking Tutorials
Financial Modeling Tutorials
Excel Tutorials
Accounting Tutorials
Financial Statement Analysis
COURSES
All Courses
Financial Analyst All in One Course
Investment Banking Course
Financial Modeling Course
Private Equity Course
Venture Capital Course
Excel All in One Course

Copyright © 2021. CFA Institute Does Not Endorse, Promote, Or Warrant The Accuracy Or Quality Of WallStreetMojo. CFA® And Chartered Financial Analyst® Are Registered Trademarks Owned By CFA Institute.
Return to top

WallStreetMojo

Free Investment Banking Course

IB Excel Templates, Accounting, Valuation, Financial Modeling, Video Tutorials

* Please provide your correct email id. Login details for this Free course will be emailed to you

Book Your One Instructor : One Learner Free Class
Let’s Get Started
Please select the batch
Saturday - Sunday 9 am IST to 5 pm IST
Saturday - Sunday 9 am IST to 5 pm IST

This website or its third-party tools use cookies, which are necessary to its functioning and required to achieve the purposes illustrated in the cookie policy. By closing this banner, scrolling this page, clicking a link or continuing to browse otherwise, you agree to our Privacy Policy

Login

Forgot Password?

WallStreetMojo

Free Accounting Course

You will Learn Basics of Accounting in Just 1 Hour, Guaranteed!

* Please provide your correct email id. Login details for this Free course will be emailed to you

Special Offer - All in One Financial Analyst Bundle (250+ Courses, 40+ Projects) View More