Revenue

The value of goods or services a business sold during a period, before any costs are subtracted. Also called turnover or the top line.

Example

Northgate's revenue rose from 3,500,000 to 4,200,000, which is growth of 20%.

Important

Revenue is recognised when it is earned, not when the customer pays. Rising revenue with rising unpaid invoices behind it is a cash problem wearing a growth story.

Related terms

• Income statement — A report of what a business earned and what it spent over a period of time, arranged in layers from revenue at the top down to net profit at the bottom.
• Accounts receivable — Money owed to the business by customers who have been invoiced and have not yet paid. Also called trade debtors.
• Accrual accounting — The convention under which revenue is recorded when it is earned and costs when they are incurred, regardless of when money actually changed hands.

Lessons that explain it

• If one customer can leave, measure what leaves with them — Customer concentration shows how much revenue depends on a few customers. Measure the share of the largest customers and what happens to the business if one leaves. (9 min)
• The list price is a claim; the realised price is the evidence — Pricing diligence compares list prices with what customers actually pay, checks discounting patterns and looks for evidence that customers would accept higher prices. (10 min)
• Not every number called revenue is the same kind of money — Financial diligence starts by separating recurring revenue from one-off fees, bookings from recognised revenue, and invoiced amounts from cash collected. (11 min)
• The income statement: what it claims was earned — The income statement is a claim about performance over a period, assembled under rules that deliberately ignore when the cash moved. Read properly it is the most useful statement; read literally it is the most misleading. (12 min)

All 578 terms in the Investing glossary