Revenue
Also called Sales, Turnover, Top line.
Everything the business charged its customers, before a single cost is taken off.
Reported as the first line of the income statement
Also called sales, turnover, or the top lineWhat it means
Revenue is what a company billed for the goods and services it delivered in a period. It is the largest number on the income statement and the one every margin is measured against, which makes it the figure a reader should be surest about before trusting anything below it.
It is recognised when the work is done rather than when the cash arrives, so a business can report record revenue and collect nothing. That gap between billing and banking is why the cash flow statement exists.
Worked example
A year of sales, before any costs.
- 1Revenue is $1,000m.
- 2Cost of revenue of $400m leaves $600m of gross profit.
- 3Every margin on this page divides by that $1,000m.
$1,000m of revenue, the denominator for everything that follows.
Every example in this glossary describes the same imaginary company, so the figures join up as you move between metrics.
How investors read it
- Read it beside cash collected. Revenue growing faster than cash from operations, year after year, means customers are being billed faster than they pay.
- Ask what it is made of. A jump from acquiring a competitor is a different thing from selling more to the same customers, and only one of them says the business got better.
- Compare the multi-year path rather than a single year, since a large contract can land in December or January and move both years.
Where it misleads
- Gross versus net presentation changes the number without changing the business: a marketplace can report everything a buyer paid or only the commission it kept.
- Sales taxes the company merely collects are inside some companies' reported figures and outside others'.
- A single year can be flattered by pulling deliveries forward, which shows up later as a year that looks unaccountably weak.
How Materiality uses it
Read from the filings rather than from any one XBRL element, because no single element is right for every filer. A REIT's rent is a lease and not a contract with a customer, a utility splits regulated from unregulated, and a bank nets interest — so several concepts are consulted and the largest wins, on the reasoning that a fragment of revenue cannot exceed revenue. Essex Property Trust reported $10.3m under the contract element against $1,774.5m of actual revenue, and taking the first available concept showed 0.5% of the top line. Revenue then feeds the growth rate in the scorecard, every margin, the common-size view and price to sales.
The full methodology covers where the figures come from, how the statements are normalised, and what is deliberately left unadjusted.
Related metrics
Revenue growth
How fast the top line is expanding, usually compounded across several years.
Gross margin
What share of revenue survives the direct cost of producing it.
Price to sales
What you pay per dollar of revenue, for companies where profit is not the point yet.
Common-size statements
Every line shown as a percentage instead of a dollar amount, so businesses of any size compare directly.
A metric on its own is a number without a business attached to it. Materialitycomputes these from a company's own SEC filings, several years of them at once, and explains what the pattern means rather than leaving you to hold fifteen definitions in your head.