Posted on 2021-10-14
Recently, I've noticed an uptick in the usage of the words Revenue and Profit in my vicinity. Whereas this isn't a bad thing, I think the meaning of each gets skewed in some conversations. Therefore, now seems like a good time to quickly review each of their definitions.
The word Revenue according to Merriam Webster's 2nd description is as follows.
the gross income returned by an investment
For example, if I sold 10 cattle for $500 each, that would leave me with a Revenue of $5000.
The word Profit according to Merriam Webster's 2nd description is as follows.
the excess of returns over expenditure in a transaction or series of transactions
If we append to the previous example and say that each cow cost me $100 each. Then we would deduct that cost from the revenue and end up with the profit. Therefore, $5000 - $1000 = A profit of $4000.
For a more detailed analysis on these two words, I encourage you to take a look at Investopedia's article comparing the two.
Return to the homepage ⤾