Revenue

Revenue is the total income generated by a company from its normal business operations—primarily from selling goods and services. It's called the "top line" because it appears first on the income statement. The basic formula is Revenue = Price × Quantity Sold.

There are different types of revenue: Operating Revenue comes from core business activities like product sales; Non-Operating Revenue comes from outside the core business, such as interest income; Recurring Revenue repeats regularly like subscriptions; and Non-Recurring Revenue consists of one-time events like asset sales.

Revenue growth is one of the most important metrics for investors. High growth indicates market demand, while declining revenue is a red flag. Always compare revenue to industry peers and inflation to get a meaningful picture.

Revenue recognition determines when a company can count revenue: when goods are delivered or services are performed (not when payment is received, under accrual accounting). Companies must meet specific accounting standards for this.

It's important to distinguish revenue from related terms: Revenue (or Sales) is total income from business; Gross Profit is revenue minus cost of goods sold; and Net Income is revenue minus all expenses.

Revenue matters because it's the foundation for all profitability metrics, indicates business scale and growth, is used in the P/S ratio for valuation, and drives investor expectations.