Are "revenue" and "income" terms one can consider interchangeable? Is it okay either way if you say "income" or "profits"... or what about "earnings"... and what is the difference between gross/net when it comes to them?
Unfortunately, confusion abounds when it comes to analyzing a company's revenue, its gross income or its net income (also known as its bottom line). Adding terms such as profit or earnings to the mix and figuring out when/if you should use those makes matters even more confusing for most people.
This video explains everything in a way that won't make your head hurt.
We will simply analyze Tom's one-man business and see how much revenue he generated last year. Unfortunately for him, he won't get to keep all that money, so we will subtract the cost of goods sold so as to calculate his gross income (or profit, or earnings... either option is okay in our case). Finally, he doesn't keep that money either, so we will ultimately have to also calculate his net income, something many analysts refer to as the bottom line.
That's really all there is to it.
You don't have to memorize the terms in a robot-like manner, the name of the game is understanding the journey from revenue to net income. This video explains just that :)
0 Comments