Sales revenue definition
/What is Sales Revenue?
Sales revenue is the amount realized by a business from the sale of goods or services. The two words can be used interchangeably, since they mean the same thing. This figure is used to define the size of a business. The concept can be broken down into two variations, which are noted below.
Gross Sales Revenue
Gross sales revenue includes all receipts and billings from the sale of goods or services; it does not include any subtractions for sales returns and allowances. It is reported at the top of the income statement.
Net Sales Revenue
Net sales revenue subtracts sales returns and allowances from the gross sales revenue figure. This variation better represents the amount of cash that a business receives from its customers, especially when it is experiencing substantial amounts of returns.
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Reporting of Sales Revenue
Sales revenue is typically reported for a standard period of time, such as a month, quarter, or year, though other non-standard intervals can be used.
How to Evaluate Sales Revenue
The key figure against which sales revenue is compared is net profits, so that the analyst can see the percentage of sales revenue that is being converted into profits. This net profit percentage is usually tracked on a trend line, to see if there are any material changes in performance. Investors also like to track sales revenue on a trend line, and especially the percentage rate of growth, to see if there is any evidence of changes in the growth rate. A declining growth rate may trigger a sell-off among shareholders.