Revenue is the total money a company earns from selling its goods or services in a period. It sits at the very top of the income statement, before any cost is subtracted — which is why it is often called the top line.
When is revenue recorded?
Companies use accrual accounting: revenue is recorded when the goods or service have been delivered, not necessarily when the cash arrives. Deliver a ₹10 lakh order to a customer who pays in 90 days, and revenue of ₹10 lakh is recorded today while the cash shows up much later.
That single rule explains a lot of the difference between profit and cash, which we return to later in the course.
Different businesses earn revenue differently
- One-off sales: a machine-tool maker sells an order and moves on.
- Repeat sales: a food brand sells the same products week after week.
- Subscriptions: a software company bills monthly or annually.
- Per-transaction: a payments company earns a small fee on each transaction.
Revenue growth (%) = (This period − Last period) ÷ Last period × 100
Why growth alone is not enough
Revenue can rise for several different reasons, and they are not equal in quality. A price rise, a volume increase, a new product, or buying another company all show up as growth — but they mean different things for the future.
| What drove the growth | What to ask next |
|---|---|
| Higher prices | Can customers be charged more again next year without losing them? |
| More volume | Is there capacity to keep growing, and is competition limited by price? |
| New products | Do they carry the same margin as the core business? |
| An acquisition | Was the purchase paid for with cash or with new shares? |
Two companies can report the same revenue growth and be in very different health.
Build an income statement
Change any input and watch the whole statement — and every margin — recalculate.
| Line item | ₹ crore |
|---|---|
| Revenue | 1,000 |
| Cost of goods / services | -400 |
| Gross profitRevenue − COGS | 600 |
| Operating expenses | -200 |
| EBITDAGross profit − Opex | 400 |
| Depreciation & amortisation | -100 |
| EBIT (operating profit)EBITDA − D&A | 300 |
| Interest | -50 |
| Profit before tax | 250 |
| Tax @ 25% | -62.5 |
| Net profit | 187.5 |
Gross margin
60%
EBITDA margin
40%
Operating margin
30%
Net margin
18.8%
The top line is not the bottom line