Difference between Profit and Revenue

Many people use profit and revenue interchangeably while talking about earnings of a company, which is incorrect as there are many differences between profit and revenue, given below are some of them –

  1. Revenue refers to that income which a company earns after sales of goods or service which company manufactures while profit refers to residual income left after the company has paid all expenses related to production goods or services.
  2. Revenue is calculated by multiplying number of units sold and selling price whereas profit is calculated by deducting cost of goods sold, administration expense, selling and distribution expense and other such expenses from revenue.
  3. Revenue can never be in negative, however profit can be negative which happens when company make loss for a year.
  4. It is easier to calculate revenue for a firm because it involves only two variables that sales price and number of quantity sold but calculating profit is much trickier as it involves many variables and therefore it requires much more expertise.
  5. Revenue is always calculated first and then one can calculate profit from that and not before, in other words revenue always precede profit.

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