Difference Between Revenue vs Turnover
Revenue is the income which the company generates by conducting its business activities of selling goods and services to its customers for a price. Turnover describes how many times the company burns using its assets. The word turnover, as well as revenue, is many times used in each other’s place, and many times they even mean the same. In a general scenario, a company earns revenue through sales. However, an organization can even generate revenue without having turnover. At the same time, it might have turnover which will not yield any revenue like in the case of inventory turnover, employee turnover, etc. In this article, we are going to learn in detail about revenue vs turnover.
Revenue vs Turnover (Infographics)
Below is the top 8 difference between Revenue vs Turnover.
Key differences Between Revenue vs Turnover
Let us discuss some of the major differences between Revenue vs Turnover:
- The main difference between Turnover and Revenue is that Turnover affects the efficiency of the company whereas Revenue affects the profitability of the company
- Turnover can be used to calculate the different types of turnover ratios such as accounts receivables turnover ratio, fixed assets turnover ratio, and inventory turnover ratio, etc. and the Revenue can be used to calculate the different types of profit ratios such as operating ratio, Gross Profit ratio, and net profit ratio.
- Revenue is recorded in the statement of income in the first line. It is mandatory for the company to record the revenue whereas it is not mandatory for the company to record the turnover as the turnover is calculated in order to get a better understanding of the statements of the company so that proper working can be achieved.
- Both revenues vs turnover play different and important in the working of any organization. Turnover of the company is important because, in order to generate a healthy profit, the company is required to know the level of turnover which it should achieve. For example, knowing the turnover is required to manage the production of the company and ensure that neither resources are not lying idle nor the business production should stop because of the non-availability of resources. On the other hand revenue of the company is an important part as it reflects the customer base strength and the business market share when there is growth in the revenue it shows the stability of the business and it helps in getting the loans from the bank as bank analyzes the revenue before passing the loan.
- There can be three types of Turnover which include cash, inventory, and labor whereas the revenue is of two types which include the operating revenue and the non –operating revenue.
Turnover vs Revenue Comparison Table
Below is the topmost comparison between Turnover vs Revenue
| Basis | Turnover | Revenue |
| Meaning | An accounting term that is used to calculate how quickly cash is collected by the company from its accounts receivables, how fast the inventory is being sold by the company is known as the turnover. | Income which is earned by the company by conducting its business activities of selling goods and services to its customers for a price is known as the revenue. |
| How to calculate? | Turnover can be of different types and the calculation will be done likewise. For example, Cash turnover = Net sales/cash and
Inventory turnover = Cost of goods sold / Average inventory. |
Revenue of the company is calculated by multiplying the number of products that the company sold during the period with the selling price of that product. Out of this, any sales return is deducted |
| Types | There can be three types of Turnover which include cash, inventory, and labor. | There can be two types of revenue which include operating revenue and the non –operating revenue. |
| Recording in financial statements | Not compulsory to record the turnover. | Revenue is recorded in the statement of income in the first line. It is mandatory for the company to record the revenue. |
| Importance | In order to generate a healthy profit, the company is required to know the level of turnover which it should achieve. For example, knowing the turnover is required to manage the production of the company and ensure that neither resources are not lying idle nor the business production should stop because of the non-availability of resources. | Revenue is an important part as it reflects the customer base strength and the business market share when there is growth in the revenue it shows the stability of the business and it helps in getting the loans from the bank as banks analyze the revenue before passing the loan. |
| Effect | Turnover affects the efficiency of the company. | Revenue affects the profitability of the company. |
| Used to calculate? | Turnover can be used to calculate the turnover ratios such as accounts receivables turnover ratio, fixed assets turnover ratio, and inventory turnover ratio, etc. | Revenue can be used to calculate the profit ratios such as operating ratio, Gross Profit ratio, and net profit ratio. |
| Example | To know the monthly sales turnover, total sales will be divided by the number of the month For example If total annual sales are of $ 120,000, then it would be divide by 12 and monthly turnover would be $10,000 | Company makes the 5,000 and then sells them at $300 per unit then revenue would be 5,000 * 300 = $ 1,500,000 |
Conclusion
It is complicated to understand the differences between revenue vs turnover but understanding the same is important and very much required for every organization for its better working and survival. Although both the turnover and revenue aren’t the same they do often have some correlation. The business earns more amounts by turning over frequently its inventory. However, it should be noted that if there is a successful inventory turnover of the company generating revenue it doesn’t mean that the company will be in profits. For example, if the company in order to sell all its inventory quickly, sells all its inventory at clearance prices then it will increase its revenue and turnover rate as well but at the same time profit will be low as the goods are sold at less price (clearance price) which is not enough with respect to the inventory costs so that the profits can be earned on it. So, both the turnover and revenue are different but important factors of any business.
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