Difference Between Revenue and Earnings

Revenue is also synonymous with income, which a firm generates from its daily business activities. In simple terms, revenue is a business’s income when it provides a service or product to a consumer.

On the other hand, earnings are the inflow of money after all the expenses, i.e., profit from a business in its daily operations. It is the amount a business earns from their day to day activities. It can be achieved by a product sold or a service availed by a customer.

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Formula

  • Revenue is calculated as the number of units of goods (or products) sold * per unit.Earnings are the amount remaining after taking out the expenses or the amount of depreciation of the underlying asset.

It can also be stated that Revenue – Expenses = Earnings; assuming the expenses are less than revenues, the company will have a profit.

It can also be derived that if expenses are more than revenue, there will be a net loss, which a company may have to suffer.

Revenue vs. Earnings Infographics

Key Differences

  • Revenue is the firm’s ability to generate income and earn better returns. On the other hand, earning is the firm’s profit from daily business activities.Revenue is related to the top line of the company. Earning is associated with the bottom line profits of the company.Revenue can be calculated by multiplying units by the price per unit. Earnings can be calculated as the difference between revenue and expenses, taxes, depreciation expenseDepreciation ExpenseDepreciation is a systematic allocation method used to account for the costs of any physical or tangible asset throughout its useful life. Its value indicates how much of an asset’s worth has been utilized. Depreciation enables companies to generate revenue from their assets while only charging a fraction of the cost of the asset in use each year.
  • read more, or interest paid.Revenue denotes the operating incomeOperating IncomeOperating Income, also known as EBIT or Recurring Profit, is an important yardstick of profit measurement and reflects the operating performance of the business. It doesn’t take into consideration non-operating gains or losses suffered by businesses, the impact of financial leverage, and tax factors. It is calculated as the difference between Gross Profit and Operating Expenses of the business.read more. Earning, on the other hand, denotes financial profitability.Revenue is of lower preference; however, it does help to identify the profitability of the firm. Earning is given much higher preference by companies as it is an inflow to the firm and adds to its profitability.

Comparative Table

Final Thoughts

Revenue and Earnings are both important in their respective terms. And they both are related to the company’s inflow of cash or liquidity, which helps the company decide whether it has gains or losses after calculating the net income and net earnings.

For instance, there is a pharmaceutical store, and you were to define the revenue and earnings for the store. Revenue is what you get from people buying medicines from the store. Whereas earnings are the profit you derive after reducing all the costs (expenses and taxes) involved in purchasing those medicines and eventually generating income.

So the question for a firm is, are the revenue and earnings the same? The answer is No. Using them is the most basic way to know and improve the money inflow of the company during a particular period and define the top and bottom line of the companyBottom Line Of The CompanyThe bottom line refers to the net earnings or profit a company generates from its business operations in a particular accounting period that appears at the end of the income statement. A company adopts strategies to reduce costs or raise income to improve its bottom line. read more.

Revenue vs. Earnings Video

This article is a guide to Revenue vs. Earnings. Here we discuss the top differences between revenue and earnings, infographics, and a comparison table. You may also have a look at the following articles for gaining further knowledge –

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