What is gross revenue?

Gross revenue is the total income generated by a company from its normal business activities within a certain period of time, without taking into consideration any expenditures from any source. As different firms have different business models, gross revenue can include not just money made from the sale of goods or services but also interest, royalties and other fees.

Also known as top-line, gross revenue is the first entry filled in a firm’s income statement, which is one of four financial statements – along with the balance sheet, the statement of retained earnings and a cash flow statement – that publicly traded companies are required to publish at set periods of time, such as the fiscal quarter or year.

Both analysts and investors focus on the figure as it helps to see whether the business is growing or not.

Where have you heard of gross revenue?

If you are interested in business media or the finance segment of your local news, you may have heard the anchors talk about the revenue of a company. Alternatively, if you are an active trader or investor yourself, you have probably checked a few financial statements of the companies before making investment decisions.

What you need to know about gross revenue

As a measure of a company’s financial performance, what does gross revenue mean? As it is a pure calculation of all the income the business earned, it allows investors or other stakeholders to see how much money the company has made over a certain period of time.

However, while gross revenue is an important metric, it does not fully illustrate a company’s financial health as it does not take costs into account. Therefore, it provides no information about profitability since a business can have excellent revenue but no net income.

For that, to evaluate a company’s value, other components of the income statement, such as net revenue, costs of goods sold (COGS), gross profit and net income, should also be taken into account.

On the other hand, for a newly established business, gross revenue is sometimes considered a measure of success. As many startups are often operating at a loss for the first few years, investors look at their gross revenue to evaluate the demand for their services or products.

Wondering how to calculate gross revenue? Unlike other components of a financial statement, it is one of the simplest to calculate: you simply add up all the income the company has generated. If the firm calculates its revenue only based on the money earned from the sale of its products or services, the gross revenue formula looks as follows:

What is gross revenue?