Revenue is the total amount of income generated by the sale of goods or services related to the company's primary operations.
Sales are the proceeds from the selling of goods or services to its customers.
How Sales & Revenue Can Differ
As mentioned earlier, it depends on the industry, since some companies use sales and revenue as synonyms. However, sales might be considered revenue, but that doesn't necessarily mean that all revenue is from sales.
- Sales and operating revenue were roughly $237 billion for the year.
- However, there were other income sources totaling over $7 billion (highlighted in green). As a result, revenue could be higher than sales since there can be other sources of income besides sales.
In the oil and gas industry, for example, it's very common for companies to generate income from the sale of an asset if the company is short on cash. These non-operating revenue sources are often nonrecurring since they're one-time events or gains. Proceeds can also include a windfall from investments, or money awarded through litigation and would also be considered non-operating revenue. Other revenue streams might include interest, royalties, fees, and donations. Revenue encompasses all these diverse sources and is a better indication of the total cash flow generated by a company. Some businesses refer to sales as operating revenue and revenue as total revenue, but the same distinctions apply.
Sales Can Exceed Revenue
Sales can be defined as the economic price paid by customers. Revenue is the total amount of money taken in by a business during a set period of time. Even though revenue is almost always the larger number, revenue could actually be smaller than sales. Consider a business that only sells hats and has no other sources of income. If its revenue formula deducts any discounts from sales or returns or damaged hats, the company's gross sales could turn out to be larger than its revenue.
Revenue can also be used to describe the money brought into a government from taxes, fees, fines, and any publicly operated services. While it's possible for a government agency to sell goods or services, you rarely see the proceeds referred to as government sales.
The Bottom Line
Whether it's gross sales, net sales, sales, or revenue, if you're analyzing a company, it's critical to factor in the industry that the company belongs to when reviewing the company's income. When looking at a company's financial statements, it's important to distinguish between sales and revenue, since some sources of revenue may be one-off events.
For more on this topic, please read "What Is the Difference Between Revenue and Income?" and "What Is the Difference Between Revenue and Profit?"