Revenue vs. Sales: An Overview
Revenue is the total income a company generates by the sale of goods or services that can be attributed to the company's core operations.
- Revenue is often referred to as the “top line” because it appears at the top of the company's income statement.
- Revenue is the income a company generates before any expenses are subtracted from the calculation.
A company reporting "top-line growth" is experiencing an increase in either gross sales or revenue or both.
Sales are the proceeds a company generates from selling goods or services to its customers:
- In accounting terms, sales comprise one component of a company's revenue figure.
- On an income statement, sales are typically referred to as gross sales.
- A company may also report net sales, which is the result of subtracting any returned merchandise from gross sales. Retail companies tend to report net sales as well as revenue.
- Revenue is the entire income a company generates from its core operations before any expenses are subtracted from the calculation.
- Sales are the proceeds a company generates from selling goods or services to its customers.
- Companies may post revenue that's higher than the sales-only figures due to supplementary income sources.
Some companies inaccurately use the terms sales and revenue interchangeably. However, while sales are revenue, all revenue doesn't necessarily derive from sales.
For many companies, they are indeed the same. But some companies routinely derive additional revenue from their business operations.
Consider the following financial data from Exxon Mobil Corporation's (XOM) income statement for the quarter ending June 30, 2019:
- Sales and operating revenues were roughly $67.5 billion for June 2019 versus $71.5 billion for June 2018.
- Total revenue was $69 billion for the quarter ending June 2019 and $73.5 billion for the same period in 2018.
- Revenues from other sources such as equity affiliates totaled more than $1.5 billion in 2019 and $2 billion in 2018.
Companies such as Exxon post revenue that include both sales and income from supplementary sources.
Many companies generate additional income from the sale of assets during periods when they’re cash poor. Other non-operating revenue gains may come from occasional events, such as investment windfalls, money awarded through litigation, interest, royalties, and fees.
Regardless of the source, these sporadic gains contribute to a company’s total cash flow.
Sales may be defined as money paid by customers. Sales are a company's core revenue for a given period.
Logically, revenue is the larger figure. However, total revenue for a period may occasionally be smaller than total sales.
Take, for example, a business that sells only hats. If the store's revenue formula deducts all discounted sales, returns, and damaged merchandise, the company's gross sales could be greater than its revenue.
Governments use the term revenue to describe the money they collect from taxes, fees, fines, and publicly-operated services.
Government agencies also sell goods or services, from drilling permits to auctions of seized property. The proceeds from these activities are seldom referred to as government sales. They report all of their proceeds as revenue.
The difference between revenue and sales is relevant to investors viewing company reports.
A company's sales indicate the performance of its core business operations, while its revenue may be padded with one-time events like sales of property.
Whether it's sales, gross sales, net sales, or revenue, it’s critical to consider the industry in question, when analyzing a company’s financial data. It’s also important to distinguish between sales and revenue, because some revenue sources may be one-off events.
Investors are more likely to focus on sales. Most importantly, they compare sales for the period to sales from the previous period or from the period one year earlier. That number indicates whether a business is actually growing or contracting.