Difference Between Turnover and Revenue

Turnover and Revenue are financial terms that are often used interchangeably in various fields, but there are varied forms of differences between the two terms. Turnover is the sales value of any organization at a particular time, whereas revenue is the income that any company generates by selling its goods and services.

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Turnover can also mean any organization generates several times revenue.

Key Takeaways

  1. Context: Turnover is used to describe business performance, while revenue refers to Income generated by a company.
  2. Components: Turnover includes sales, investments, and other income sources; revenue is primarily Income from sales or services.
  3. Employee perspective: Turnover can also refer to the rate at which employees leave and are replaced within an organization unrelated to revenue.

Turnover vs Revenue

The difference between turnover and revenue is that turnover refers to how quickly any company sells its inventories or collects cash from accounts receivable. In contrast, revenue is the money a company earns by simply selling its goods and services at a specific price to generate the maximum profit.

Turnover vs Revenue

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Revenue broadly defines the profitability of a company that it gains by selling its goods at a particular price to consumers. This revenue further establishes the growth of a specific company in the market.

Turnover decides the organisation’s efficiency because turnover is the accounting concept that calculates how quickly any organization conducts its operations.


 

Comparison Table

Parameters of ComparisonTurnoverRevenue
DefinitionTurnover is the amount of business any organisation does in a particular period.Revenue is the income generated by the company by selling goods and services. It is the gross income of the company.
TypesTurnover can be divided into three categories: inventory, cash, and labour.Revenue can be broadly divided into categories that are Operating and non-operating income.
ImportanceTurnover is essential to manage the production levels of the company.Revenue is essential to determine the growth of the company.
ImpactTurnover demonstrates the efficiency of any company by determining the rate at which the work is done.It demonstrates the company’s profitability by determining the money earned by selling goods and services.
UsesIt is usually used to calculate the asset turnover ratio, inventory turnover ratio, and sales turnover.It calculates the net profit, gross profit, and operating profit margin.

 

What is Turnover?

Turnover is the rate at which any company conducts its business operations. It is often perceived as the concept to determine how quickly any company sells its inventory.

The most common uses of this concept are looking at the accounts receivable and inventories ratios. However, in different fields such as accounting, business, human resource management, etc., the word can have varied terminologies but usually means the same thing.

Some of these definitions are listed as follows:

  1. Accounting sector- The number of times an asset (cash, inventory, raw materials) is replaced or revolves during the accounting year.
  2. Finance sector- the value of shares traded on the stock exchange during a day, month, or year. 
  3. Human resource management- the number of employees hired to replace those who left or were fired during the 12 months.

Turnover is essential to determine the production levels and ensure that nothing is excluded from the list over time, further defining the company’s efficiency.

 

What is Revenue?

Revenue is simply the income generated by any organization by selling their goods and services at a particular to ensure profit. The revenue gives the gross income of the company, from which the costs are deducted to give the company’s net income.

Revenue is essential to keep checking the company’s profitability by selling the products and services. That is why it is often referred to as sales of the company.

It is often the company’s top line because it comes first in the income statement. There is profit when revenue exceeds the expenses; therefore, the organization must increase the revenue and reduce the costs to gain the maximum profits.

The Revenue can be subcategorized into two forms that are:

  1. Operating revenue is the revenue generated from the core departments of the organization.
  2. Non–operating revenue: it is the revenue that is generated from secondary sources such as money awarded through litigation.
revenue

Main Differences Between Turnover and Revenue

  1. Turnover is the rate at which any company conducts business over a particular period. In contrast, Revenue is the money any organisation earns by selling its products at a special price.
  2. Turnover is the primary determinant of the efficiency of any company because it keeps a check on the management of production levels, whereas Revenue determines the profitability of any organization. After all, it keeps a check on the organisation’s gross income.
  3. Revenue is predominantly of two types: operating and non-operating, whereas turnover can be divided into three categories: inventory, cash, and labour.
  4. Good ratios such as gross profit and net profit are calculated using revenue. In contrast, other ratios, such as inventory turnover ratio, sales turnover, and asset turnover ratio, are computed using the organisation’s turnover.
  5. The overall production levels of the company depend on turnover, whereas the overall growth of the company depends on revenue.
Difference Between Turnover and Revenue

References
  1. https://eprints.lse.ac.uk/64916/1/Spinnewijn_Production%20versus%20Revenue%20Efficiency.pdf
  2. https://anesthesiology.pubs.asahq.org/article.aspx?articleid=1942223&resultclick=1
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