Gross revenue is the total amount of money (income) earned by a company over a period of time. The term is used in accounting, finance, sales, and general business to describe how a company performed across all of its business units in selling its products or services.
In business and quarterly reports, gross revenue is often used as an indicator of an organization’s worth because it represents all monies received for selling, licensing, and all other ventures where its goods and services are exchanged for money.
For startups and niche vendors where other indicators don’t exist, gross revenues can be used to value the company’s worth by dividing the value of the company’s assets by gross revenues.
While gross revenues are a key measure of a company’s value, it’s not the sole metric to consider.
What is the difference between gross and net revenue?
Gross revenue is all of the money a company receives for selling goods or services.
Net revenue is derived by subtracting the cost of goods sold (materials and labor) from total sales, along with all the associated expenses including salaries, expenses and overhead. Net revenue then is a measure of how cost effectively the company brings products to market.
Net revenues are also called gross profits. From gross profits, additional costs must be subtracted—taxes due, marketing costs, salaries, etc.—to determine what the company’s net profits are
Gross revenue = total sales of good
Cost of Goods Sold = materials and labor
Net Revenues = gross profits
Example of gross revenue
TabletCo manufactures tablets and sells them for $200. Last year, TabletCo sold 50,000 tablets, earning gross revenues of $10 million.
From its $10 million, TabletCo pays $2 million for materials and labor to manufacture the tablets. Thus, its net revenues are $8 million.