Revenue vs Net Profit

Revenue and Net Profit measure fundamentally different aspects of a company's financial performance, representing opposite ends of the income statement. Revenue, often called the "top line," is the total amount of money generated from selling goods or services before any expenses are deducted, reflecting market demand and pricing effectiveness. Net Profit, known as the "bottom line," is what remains after subtracting all expenses—including cost of goods sold, operating expenses, interest, taxes, and depreciation—from revenue, representing the actual earnings a company retains after covering all costs of doing business.

A technology startup should emphasize Revenue when demonstrating market traction or growth trajectory to investors in early stages, as rapid revenue growth often signals product-market fit even before profitability is achieved. For instance, a SaaS company might highlight their 150% year-over-year revenue growth to show scaling potential and market validation. Conversely, the same company would focus on Net Profit when proving business model viability or sustainable operations to later-stage investors or when considering expansion funding. If the company has reached $10 million in annual revenue but still operates at a $2 million loss, investors would need to evaluate whether the continued losses represent strategic investments in growth or fundamental flaws in the business model. While Revenue showcases a company's ability to generate sales, Net Profit ultimately determines whether those sales translate into sustainable business success.

Revenue

Net Profit

What is it?

Revenue is the total income generated from a company's primary business operations before deducting any costs or expenses. Often called the "top line" because it appears at the top of the income statement, revenue represents the gross amount earned from core business activities such as product sales, service fees, subscriptions, or licensing agreements.

Net profit is the value that remains after all expenses are subtracted from the company's total income. It is one of the best ways to determine a business' profitability and is often referred to as the bottom line. Net profit represents the ultimate financial outcome of all business activities during a specific period and appears as the final line item on the income statement, hence the term "bottom line."

Who is it for?

Chief Financial Officer

Chief Revenue Officer

Chief Financial Officer

Financial Analyst

Accountant

Controller

Formula

ƒ Sum(Revenue)

ƒ Sum(Revenue) - Sum(Operating Expenses) - Sum(COGS) + Sum(Other Revenue) - Sum(Other Expenses)

Example

Revenue calculation depends on your business model and revenue recognition method. For a subscription business, if a customer signs an annual contract for $12,000 with monthly payments, you would recognize $1,000 in revenue each month over the 12-month period, totalling $12,000 for the year. For one-time sales, revenue equals the sale price multiplied by units sold. It's crucial to distinguish between cash received and revenue recognized - they may not occur in the same period depending on your accounting method.

A software company sells software and ongoing product maintenance. They earned $3M of Revenue in the fiscal year. In the same year, the company sold a pile of office furniture which netted a gain on disposal of assets in the amount of $0.5M. All other annual costs, such as salaries, wages for seasonal contractors, commissions for agents, office rent, utilities, software subscriptions, office supplies, income tax, and interest costs totaled $1.5M. The Net income for this company for the current fiscal year is $2M: $3M Revenue - $1.5M OPEX + $0.5M Gain on assets.