Term · Profitability & Growth
Revenue
In briefRevenue is the income from a company's ordinary business activity in a period, before deducting costs. It sits at the top of the income statement and is the basis for margins and growth rates. However, revenue is neither profit nor cash; it is only the top line.
Definition
Revenue comprises the income from a company's ordinary business activity within a period, typically before deducting costs. It sits at the top of the income statement and is the starting point for margin and growth metrics. When revenue is recognized is governed by revenue recognition rules.
How it is calculated
Formula. Revenue = quantity sold × price (simplified representation)
Why it matters for small caps
For small companies, the quality of revenue is decisive: recurring or one-off, organic or acquired. Pure revenue growth without regard to margins and cash can be misleading.
Common misreadings
- Revenue is often equated with profit or cash flow, even though it accounts for neither costs nor actual cash receipts.
In the process
Frequently asked
Is revenue the same as profit?
No. Revenue is stated before deducting costs. Profit only arises after material, personnel, interest and other expenses as well as taxes have been deducted.
Why does the quality of revenue matter?
Recurring, organically grown income is more resilient than one-off or acquired revenue. Two companies with the same revenue can have completely different earnings and risk profiles.
When is revenue recognized?
According to the revenue recognition rules, within the IFRS framework in particular under IFRS 15. They determine when and in what amount income may be recorded.
Related terms
Education only, not investment advice. Ranges and thresholds are didactic orientation values, not an official standard.