Revenue vs profit

Revenue is the total money a company earns from its main business during a period. Net profit is what remains after subtracting expenses from that revenue. The profit and loss statement tells this as a three-part story: earned, spent, kept.

Revenue and Profit side by side

	Revenue	Profit
What it is	The total money earned from the main business in a period	What remains after subtracting expenses from revenue
Position in the story	Earned	Kept
Formula	Sales and other money earned from the main business	Revenue minus expenses
Can it be high while the other is low	Yes; high revenue with high costs can leave little profit	Yes; it can be small even when revenue is large
What it needs to be read properly	The period it covers	The period, and what was spent to earn the revenue

Earned, spent, kept

A profit and loss statement, the P&L, covers a stated period, a quarter or a year, never a single instant. Within that period it tells three things in order. Revenue is what the company earned from its main business. Expenses are what it spent to run the business and earn that revenue, such as materials, wages and rent. Net profit is revenue minus expenses, whatever is left over.

Why a long statement is not foreign

A real P&L lists many unfamiliar line items, but each one is a more detailed version of earned, spent or kept. A line called employee benefit expense is still spending. A line called other income is still something earned.

One number alone tells little

A profit figure without its period is like hearing someone has 50,000 rupees without knowing if that covers a good month or a bad year. Before you judge any number on a P&L, ask what period it covers, and what happened in between to earn it and to spend it.

From profit to a margin

Dividing profit by revenue gives the profit margin: the share of every rupee of sales the company keeps. It only means something beside companies in the same sector. Maetis does not give investment advice.

A year of a snack maker (hypothetical numbers)

A listed maker of packaged food earns ₹500 crore in revenue for the year ended March 31 and spends ₹420 crore running the business. It keeps ₹80 crore as net profit. The profit margin is ₹80 crore divided by ₹500 crore, which is 16 percent. Revenue tells you how much came in, and profit tells you how much was kept.

Common questions

What is the difference between revenue and profit?: Revenue is the money a company earns from its main business. Profit is what is left after subtracting expenses from it.
Can a company have high revenue and low profit?: Yes. If its expenses are large compared with its revenue, little is left as profit.
What is net profit?: Revenue minus expenses for a period: what remains once the spending is accounted for.
Where do I find revenue and profit?: In the company's profit and loss statement in its results or annual report.

This page compares ideas and does not recommend either one. Maetis does not give investment, tax or legal advice.