What is a company’s Revenue?

 

Revenue is the total sales of a company. Revenue represents the total amount of money received by the company from its customers.

Revenue is not a company’s profit because it does not reflect any expenses incurred by the company in producing those sales.

 

For example, when you purchase a bottle of Coca-Cola for $1 that is reported as $1 in revenue for Coca-Cola. However it may have cost Coca-Cola 60 cents to produce that bottle after factoring in labor costs, cost of plastic to produce the bottle, costs of bottling equipment etc. Coca-Cola’s profit on that bottle would then be 40 cents.

 

 

 

Revenue is found on a company’s 10-Q or 10-K financial reports, in the Income Statement.

 

Example below from Intel’s (INTC) 2012 2nd quarter earnings, which can be found here:

 

(click to enlarge)

 

 

Revenue is a very useful tool for evaluating a business. Revenue shows us the demand for the company’s product. If a company’s revenue is increasing, it shows that demand for the company’s products are increasing.

 

 

However by itself, revenue does not show us how a company is controlling expenses and therefore how much the company is profiting from its sales.

 

Revenue is commonly referred to as the “top line” number because it is what a company “starts with”. After revenue is recorded then expenses are subtracted from the revenue to give the company’s profit or “bottom line” number.

 

Revenue is used to calculate:

 

P/S (Price to Sales) ratio –

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