Revenue **is the money generated from normal business operations, calculated as the average sales price times the number of units sold**. **Revenue is known as the top line because it appears first on a company's income statement**. __Net income__, also known as the bottom line, is revenues minus expenses. There is a profit when revenues exceed expenses.

To increase profit, and hence earnings per share (EPS) for its shareholders, a company increases revenues and/or reduces expenses. Investors often consider a company's revenue and net income separately to determine the health of a business. Net income can grow while revenues remain stagnant because of cost-cutting.

Such a situation does not bode well for a company's long-term growth. When public companies report their quarterly earnings, two figures that receive a lot of attention are revenues and EPS. A company beating or missing analysts' revenue and earnings per share expectations can often move a stock's price.

**Formula and Calculation of Revenue**

The formula and calculation of revenue will vary across companies, industries, and sectors. A service company will have a different formula than a retailer, while a company that does not accept returns may have different calculations than companies with return periods. Broadly speaking, the formula to calculate net revenue is:

**Net Revenue = (Quantity Sold * Unit Price) - Discounts - Allowances - Returns**

The main component of revenue is the quantity sold multiplied by the price. For a service company, this is the number of service hours multiplied by the billable service rate. For a retailer, this is the number of goods sold multiplied by the sales price.

Source: Investopedia, Revenue Definition, Formula, Calculation, and Examples, accessed 25 December 2023, <https://www.investopedia.com/terms/r/revenue.asp>

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