Net Worth and Revenue are both an indicator of the size and importance of any entity. This can be an individual, club, firm or a company.
It is true that net worth and revenue both relate to the strength and overall health of a business. But these two things are not the same and it is important to understand their difference.
Before digging in deeper, it is best to have a clear understanding of net worth as well as revenue.
What is Revenue?
Revenue: is the amount of money a company receives in a given period of time (usually a month, quarter, or year) from its normal business activities, usually from the sale of goods and services to customers.
Revenue is also referred to as sales or turnover. Some companies receive revenue from interest, royalties, or other fees. Revenue may also refer to a company’s net sales.
The revenue figure doesn’t take into account any expenses that may have been incurred to gain that income though, so it doesn’t show profitability.
Revenue is one element of the profit equation, but it’s not profit itself. Profit equals revenue minus expenses, and it’s the amount a company keeps after it pays all its bills.
Net revenue is the gross revenue minus returns, allowances for damaged or missing goods, and any discounts allowed.
Total assets minus total liabilities equals net worth, which is also known as stockholders’ equity. Assets are things that can be converted into cash such as cash itself, real estate, stocks and bonds, and personal property such as cars and jewelry. Liabilities include mortgages, lines of credit, loans, and credit card balances.
Difference between Revenue and Net Worth
Revenue is the total amount of money that a company receives from its normal business activities, usually from the sale of goods or services to customers. The net worth of a company is determined by calculating its liabilities and assets, also known as net assets.
Revenue is also referred to as sales or turnover. Net worth is a way to describe the overall value of everything an organization owns minus what it owes.