Revenue in the profit and loss statement of a company

Revenue refers to the main income source of a business. Generally, it refers to income received or accrued from the provision of services and sale of goods. It is the “top line” figure from which costs of sales and operating expenses are deducted to determine the net profit/loss for a specific period – monthly/quarterly/annually. That said, it should exclude non-business income such as income received from sale/disposal of fixed assets, government grants and interest.

We can never emphasise too much the importance of  distinguishing a company’s revenue and net profit separately. This is because it is possible to have a situation where the net profit grows while the revenue figures remains flat. It may be an indication that the company is cutting cost to maintain market share or it is not investing wisely to generate revenue and market growth.

For this reason, it will be prudent to examine the revenue of a company so as to identify opportunities and solve problems.


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