Difference Between Revenue vs Turnover

Revenue and Turnover are often used interchangeably, and in many contexts, they also mean the same. For example, assets and inventory are turned over when they flow through a business either by selling assets or outliving their useful lives. When these assets generate income by sales, it is termed Revenue. Turnover can also refer to business activities that are not necessarily involved with sales, for example, employee turnover.

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In this article, we look at Revenue vs. Turnover in detail.

Revenue vs. Turnover Infographics

Here are the top 9 differences between Revenue vs. Turnover

Revenue vs. Turnover Key Differences

The critical differences between Revenue vs. Turnover are as follows –

  • Revenue represents the amount of money a company makes by selling its goods or services to customers. On the other hand, turnover refers to the number of times a company burns through assets like inventory, cash, and workers.Revenue is considered vital because it helps understand the strength of the business, the customer base, size, and market share. An increase in revenues is a sign of stability and showcases confidence in the business. For a company to get loans and capital on credit, they need stable revenues. Accounts receivable turnoverAccounts Receivable TurnoverAccounts Receivable turnover, also known as debtors turnover, estimates how many times a business collects the average accounts receivable per year and is used to evaluate the company’s effectiveness in providing a credit facility to its customers and timely collection. Accounts Receivable Turnover Ratio Formula = (Net Credit Sales) / (Average Accounts Receivable)read more and inventory turnover are the most commonly used metrics that help determine the company’s liquidity position.Revenue is mentioned as Sales on the income statement and is mandatory for all the public companies to report. Turnover, on the other hand, is not compulsory to report and is calculated to understand these reported statements better.Revenue can be Operating and Non-operating Operating revenue is the Revenue earned from regular business activities. In contrast, non-operating revenues are the additional Revenue generated through other activities like rent, dividendsDividendsDividends refer to the portion of business earnings paid to the shareholders as gratitude for investing in the company’s equity.read more, etc.Revenue is calculated as Total sales less any returns. While Turnover ratiosTurnover RatiosTurnover Ratios are the efficiency ratios that measure how a business optimally utilizes its assets to generate sales from them. You can determine its formula as per the Turnover type, i.e., Inventory Turnover, Receivables Turnover, Capital Employed Turnover, Working Capital Turnover, Asset Turnover, & Accounts Payable Turnover. read more are calculated as Cash turnover – Net Sales/Cash, Total asset turnover – Net Sales/Average Total Assets, and Fixed Asset turnover – Fixed Assets/Net Fixed Assets.Revenue affects the profitability of the company, while turnover affects the efficiency of the company.Revenue for a computer selling company can be determined by multiplying the number of units sold by the price per revenue. In contrast, turnover can be determined by the number of computers sold in a year.Revenue is essential to understand as it helps determine the company’s growth and sustainability; on the other hand, understanding the turnover is necessary to manage production levels and ensure that nothing is left idle as inventory for an extended period.

Revenue vs. Turnover Head to Head Differences

Now, let’s look at the head-to-head differences between Revenue vs. Turnover.

Conclusion

The difference between Revenue vs. Turnover is complex but essential for all organizations to survive. Increasing and maximizing revenuesMaximizing RevenuesRevenue maximization is the method of maximizing a company’s sales by employing methods such as advertising, sales promotion, demos and test samples, campaigns, references. It aims to capture a larger market share in an industry. Technically, revenue is maximized when MR (Marginal Revenue) equals zero.read more is a vital aspect that all organizations strive to achieve. Comparing revenue year on year helps them determine which direction the company is heading into and if there is any scope for improvement. To determine whether turnover ratios are correctly calculated, it is essential to have a benchmark set. Determining the correct turnover ratios mainly depends on the nature of the industry and the business type. Although there is a difference between Revenue vs. turnover, both are essential concepts to business.

Revenue vs. Turnover Video

This article has been a guide to Revenue vs. Turnover. Here we discuss the top 9 differences between Revenue and Turnover, infographics, and a comparison table. You may also have a look at the following articles –

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