Revenue vs Profit: What's the difference and why it matters for Indian businesses

Business Upturn

a day ago

For anyone trying to understand a company's financial health, two terms appear almost everywhere: Revenue and Profit. Many new investors, entrepreneurs, and students often confuse the two. Let's break it down with simple examples relevant to Indian businesses. What is revenue?
Revenue (also called Sales or Topline) refers to the total money a company earns by selling its products or services during a specific period.
Think of it as: Total income generated before any expenses are deducted.
Example:
If Dabur India sells personal care products worth Rs 500 crore in one quarter, that Rs 500 crore is its revenue. What is profit?
Profit (also called Net Income or Bottomline) is the money left after deducting all expenses, including operating costs, salaries, rent, interest, depreciation, and taxes, from the revenue.
In short: Profit = Revenue – Total Expenses
Example:
If Dabur's total expenses (raw materials, salaries, marketing, taxes) for the same quarter were Rs 400 crore, then:
Profit = Rs 500 crore – Rs 400 crore = Rs 100 crore Types of profit in Indian financial statements:
Gross Profit:Revenue minus cost of goods sold (COGS).
Example: For a restaurant chain like Barbeque Nation, this would mean revenue minus food material costs.
Operating Profit (EBIT):
Gross profit minus all operating expenses (excluding interest and taxes).
Net Profit:
Final profit after all expenses, including taxes and interest, are deducted. Why is this important for investors and business owners? Revenue shows scale:
High revenue shows a company is selling a lot, but doesn't guarantee profit.
Profit shows efficiency:
A company with moderate revenue but high profit margins (like Infosys ) may be a more efficient business.
Misleading perception:
Some startups and new-age tech companies (like Zomato or Paytm) may report high revenue but still run at a loss for years. Quick summary:
While Revenue tells you how much money is coming in,
Profit tells you how much the company is actually keeping.
Understanding both is essential when evaluating any Indian company, whether you're an investor, a student, or a budding entrepreneur.
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Aditya Bhagchandani serves as the Senior Editor and Writer at Business Upturn, where he leads coverage across the Business, Finance, Corporate, and Stock Market segments. With a keen eye for detail and a commitment to journalistic integrity, he not only contributes insightful articles but also oversees editorial direction for the reporting team.