Revenue vs Sales

‍Revenue is the total income generated 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 is 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.

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Balance Sheet

‍A balance sheet is a snapshot of a company’s financial position at a specific point in time.

It is a way for managers to understand how much wealth the company owns and owes, as well as its ability to pay back what it owes.

A balance sheet has three main parts: assets, liabilities, and equity.

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Equity can be negative if liabilities exceed

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Revenue

Some companies inaccurately use the terms sales and Revenue interchangeably. However, while sales are Revenue, all Revenue doesn’t necessarily derive from sales.

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Revenue is the total income a company gets from sales, incoming assets or cashing out on investments. Revenue may include sales, but it can also include other sources of income as well.

For many companies, they are indeed the same. But some companies routinely derive additional Revenue from sources not related to direct sales – such as interest on investments, for example.

Consider the following financial data from Exxon Marathon’s (XXM) income statement for the quarter ending June 30, 2019:

Total Revenue for the quarter ending June 2019 was $69 billion and $73.5 billion for the same period in 2018. Revenue from other sources, such as equity affiliates, totalled more than $1.5 billion in 2019 and $2 billion in 2018.

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Non-Operating Revenue

‍Exxon has some interesting revenue streams. For example, some of their Revenue includes both sales and income from supplementary sources like the Exxon Mobil Affiliate Network.

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, the money awarded through litigation, interest, royalties, and fees.

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Sales

‍Sales are the definition of the money a company generates from customers.

They make up a company’s core income during a given period.

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Despite this, Revenue might sometimes be less than sales, leading to the perception that people won’t buy anything regardless of price or features.

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.

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Government Sales

‍Governments use the term revenue to describe the money they collect from taxes, fees, fines, and public services.

Government agencies also sell goods and 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.

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Revenue vs Sales

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Here are the key differences explained in detail –

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Key Differences

Revenue is the money a company makes from its core operations before expenses are subtracted. Sales are the money a company makes from selling goods or services to customers.

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.

Sales (gross sales, net sales, or revenue) analysis is very important in any industry.

It’s also crucial to distinguish between sales & Revenue because some sources of Revenue may not immediately be classified as “sales” due to their nature.

Sales coaching programs can equip sales teams with the necessary skills to effectively understand and communicate the difference between revenue and sales to potential clients and stakeholders.

Investors are more likely to focus on sales when they compare them to the previous period or the previous year’s sales. If the number is growing, it indicates that the business is growing.

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Revenue Definition in Accounting

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Revenue in accounting is any money that a company makes from selling its products, whether the customer pays with cash, check or credit card. If the company uses cash accounting, it records Revenue when the client pays.

Sales and Revenue, in accounting, mean the same thing. They are, however, different from income, even though some people use all three terms interchangeably.

Most companies will have more than one source of Revenue.

For example, if you loan out money to others, the income would count in the interest column instead of in sales or anything else.

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Revenue vs Sales – Head to Head

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Basis of comparison between Revenue vs Sales

Meaning A total amount of money generated by the company Income generated by the selling of the company’s goods or services

Calculation Revenue is calculated by adding sales with other income.

Sales can be calculated by multiplying the total goods/services sold by their price.

Example If sales of XYZ is $20,000, and income from other sources is $5,000, then Revenue would be $25,000. If products sold by XYZ are 2,000, and the price per product is $10 per product, then sales would be $2000.

Indicates the company’s ability to invest and allocate its resources to maximize the earning potential Indicates a company’s capability of selling it’s primary goods/services to make a profit

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Conclusion

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As we can see, sales and Revenue aren’t the same even if we use them interchangeably.

When a company first starts, it has little direction in the market. To stay afloat, it needs to utilize any opportunities for generating income so that it can create products/services and sell them.

That’s why clearly, sales often come when the company has the money to manufacture products/ buy products at a lower price.

Article by Cliently