Difference Between Turnover and Revenue
Turnover and revenues are two important financial concepts that people must be aware of. In this blog, we will explain these two topics and cover the difference between turnover and revenue.
It’s important to understand the difference between revenue and profit when looking at your business finances. Turnover and revenue are two different concepts in accounting that are often confusing. The main difference between turnover and revenue is that turnover determines how quickly a business collects money from accounts receivable or sells its inventory, while revenue is the money a company earns from consumers who buy its goods and services.
Comparison Table – Turnover vs Revenue
| Turnover | Revenue | |
|---|---|---|
| Definition | Money a business earns after selling its products/services. | Profit of a company after all costs have been deducted. |
| Types | Divided into three categories – inventory, cash, and labour. | Divided into operating and non-operating incomes. |
| Importance | Manage the production levels and operations of the company. | Determines the company’s growth. |
| Impact | Demonstrates any company’s efficiency by determining the speed at which work is done. | Demonstrates a company’s profitability by determining the money earned from selling goods and services. |
| Use | To calculate asset turnover rate, inventory turnover rate, and sales turnover. | To calculate net profit, gross profit, and operating profit margin. |
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What is Turnover?
Turnover refers to a business’s revenue or the rate at which a company’s inventory or assets are sold and replaced over a given period. It helps to measure a company’s performance.
We can calculate turnover by taking the total sales or revenue earned during a specific period, such as a month, quarter, or year.
Example. A trader deposits $50 with a 20% bonus. $60 was added to his real account. A required business volume for that bonus is $350. The trader then opens a trade for $10 in an asset with a return of 83%. $10 (the investment) x 83% (the return) = $8.3 will be counted in the turnover.
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What is Revenue?
Revenue refers to the money that comes into a business from regular business activities, such as selling goods and services to customers. In other words, income is all the cash your business generates before expenses are subtracted.
Revenue = Quantity x Sale Price
There are two main types of revenue:
- Operating Revenue: Operating Revenue refers to a company’s revenue from its primary business activities, such as selling products or providing services. This includes revenue from selling goods or services, rental income, interest income, and other income related to the company’s operations.
- Non-Operating Revenue: This refers to a company’s revenue from activities unrelated to its primary business operations. Non-operating revenue includes revenue from investments, gains on the sale of assets, and other types of income not directly related to the company’s core business activities.
Difference Between Turnover And Revenue
- Turnover is the rate at which any company conducts its business during a given period, while revenue is the money any organization earns by selling its products at a given price.
- Turnover is the main determinant of the efficiency of any company since it controls the management of production levels, while revenue determines the profitability of any organization. After all, it controls the gross income of the organization.
- Revenue is predominantly of two types which are operating and non-operating income. On the other hand, turnover can be divided into three categories: inventory, cash and labor.
- Profitability ratios, such as gross and net profit, are calculated using revenue. In contrast, other ratios, such as inventory turnover rate, sales turnover, and asset turnover ratio, are calculated using the organization’s turnover.
- The company’s overall production levels depend on turnover, while the company’s overall growth depends on revenue.
Key Takeaways
- Turnover represents how quickly a company runs its business.
- We can measure turnover through the accounts receivable and inventory ratios.
- The profitability of both successful and unsuccessful trades count in the turnover. It does not include tied deals.
- Revenue is generally known as a business’s top line. It is typically listed at the top of the statement of income and balances.
FAQs
What is the difference between ordinary income and profit?
Ordinary income includes all a company earns in the normal course of its activity. On the other hand, profit refers solely to the money left over after paying all expenses.
What is the difference between profit and net income?
After paying all the fixed and variable costs incurred in running a small business, what is left is called the net income. Meanwhile, profit is the amount left after subtracting all expenses.
What is more important, revenue or profit?
Both are very important and can help you better understand your business's finances. However, earnings give you a more accurate understanding of your finances.
Is the volume of business equal to the invoices issued?
The volume of business does not have to coincide with the total income. It only refers to those that come from your normal business activity.
What does business volume measure?
The volume of business gives us an idea of u200bu200bthe company's evolution. If the volume goes up, the company has more capacity to produce.
Rashmi is a postgraduate in Biotechnology with a flair for research-oriented work and has an experience of over 13 years in content creation and social media handling. She has a diversified writing portfolio and aim... Read Full Bio
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