profit vs revenue

One number is gross, the other is net

Revenue counts what customers paid you. It says nothing about whether the business is viable. Profit is a result: revenue minus the costs of earning it. That single subtraction is the whole distinction, and it is why a company can be enormous by revenue and still lose money.

Using each correctly

• "The company posted revenue of £4.2m, up 18% on last year."
• "Despite record revenue, it made a loss of £600,000."
• "After wages and rent, the shop's profit was under £15,000."

Note that profit comes in layers, and a headline figure is meaningless without saying which one:

• Gross profit — revenue minus the direct cost of the goods or services sold.
• Operating profit — gross profit minus running costs such as salaries, rent and marketing.
• Net profit — what remains after interest and tax as well.

The test

Ask whether anything has been subtracted from the number. If nothing has, it is revenue. If the figure only makes sense with an "after…" attached — after costs, after tax — it is profit. Another quick check: revenue can never be negative, but profit can, at which point it is called a loss.

Where writers go wrong

The frequent error is reporting revenue as though it were earnings: "the firm made £5m last year" when £5m was sales, not profit. That overstates the business by a wide margin and, in financial writing, is a factual mistake rather than a stylistic one. If you are unsure which figure a source is quoting, look at where it sits in the accounts — revenue heads the income statement, profit closes it.

Vocabulary varies by country. British companies commonly say turnover where American ones say revenue; the two mean the same thing in this context. Sales is another near-synonym for revenue, though it strictly covers only income from selling, excluding things like interest received. And margin is profit expressed as a percentage of revenue, so a 20% net margin on £100,000 of revenue means £20,000 of net profit.