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In accounting terms, sales make up one component of a business's revenue. Sales are the proceeds from the provision of goods or services to customers, but this doesn't capture all of the sources of income for most firms. 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 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, it 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, then the company's gross sales could actually exceed its revenue.

Revenue can also be used to describe the money brought into a government, made up of taxes, fees, fines, transfers and any publicly operated services. While it is possible for a government agency to sell goods or services, you rarely see the proceeds referred to as government sales.

Accountants use revenue and sales figures to build financial statements, and investors use these statements to analyze company fundamentals. Sales (operation revenue) is useful for determining how efficiently a company turns a profit on its primary goods and services. It can also be combined with non-operating revenue for net income calculations and overall business efficiency measurements.

It's important to distinguish between sales and revenue, since not all sources of income are equally reliable or repeatable. Investors, accountants, regulators and those involved with corporate governance (such as managers and owners) all examine the relationship between sales and revenue.

Revenue is a big deal when examining the fundamentals of any company. There are other important metrics as well that differ from revenue, but also measure a company's profitability and operating efficiency. Check out these articles - What is the difference between revenue and income?, What is the difference between revenue and profit?, What is the difference between revenue and earnings?, and What is the difference between revenue and operating income?

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