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Gross revenue is the amount of money earned by a business without considering expenses. Gross income refers only to profit earned from sales or other sources without considering expenses. Expenses subtracted from gross income result in a company’s gross income, which reflects its ability to continue operating.
Gross revenue is the amount of money a business earns, without considering the costs incurred by a business that subtract that revenue. A retail business that sells a product, for example, earns revenue based on sales of that product, but it also needs to consider the cost of purchasing that product from vendors, expenses for paying employees, overhead costs of running the business, and lost revenue due to to returned products or theft. Gross income refers only to the amount of profit earned based on sales of products or services or other sources of income, such as royalties or investments, without consideration of other expenses.
Also sometimes referred to as “net income,” gross income is not an important consideration for many companies, although it can be important in some situations. As this income does not reflect the costs of doing business, it does not necessarily reflect the performance of a company or company. The term “top line” refers to the placement of gross income in a budget analysis, as it is usually placed at the top of that report. Expenses, therefore, are located below this amount and ultimately result in the “bottom line” at the bottom of the report, which indicates revenue or gross profit.
A number of different expenses can affect the difference between a company’s gross income and gross income. New businesses often have huge start-up costs that need to be overcome before any revenue can become income or profit. Retail businesses typically subtract cost of goods sold, as most retail businesses sell products purchased from suppliers rather than selling products that the company manufactures. Even a company that manufactures products for sale to other companies must consider the raw material costs and construction costs that subtract from a company’s gross income.
Other costs can include employee compensation and benefits, overhead costs of running the business, and potential lost sales due to returned products and theft. Once these expenses are subtracted from the gross income at the top of a budget report, the resulting figure is a company’s gross income. This figure is typically what is reported to shareholders and business analysts, as this income reflects how well a company will be able to continue operating. New businesses, however, may sometimes report gross income rather than revenue, as the initial “bottom line” for that business is often a negative total, and revenue may more accurately reflect customer interest or sales.
Asset Smart.
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