Yatırımcı.AI

Sales (revenue)

Sales are the total income a company earns from its core activity over a period and the top line of the income statement. Revenue or net sales is the income left from product and service sales after returns and discounts.
Contents
  1. 1.Key points
  2. 2.Formula / calculation
  3. 3.Interpretation
  4. 4.Pitfalls
  5. 5.Frequently asked questions

Key points

  • It is the most basic measure of a company’s size and growth rate and the denominator of every margin calculation.
  • Sales growth above inflation means real volume growth or pricing power.
  • nominal sales growth is misleading under high inflation; look at real growth.

Formula / calculation

Net sales = Gross sales − Returns − Discounts. Annualised sales are the sum of the last four quarters. Sales growth = (This period − Same period last year) / Same period last year × 100.

Interpretation

Sales growth above inflation means real volume growth or pricing power. Gross margin, EBITDA margin and net margin are all computed relative to sales; falling margins on rising sales indicate cost pressure.

Pitfalls

nominal sales growth is misleading under high inflation; look at real growth. Consolidated sales include subsidiaries. Revenue recognition timing (long-term contracts) creates quarterly swings.

Pages where this term appears

Related terms

Frequently asked questions

Sales are the total income a company earns from its core activity over a period and the top line of the income statement.

Net sales = Gross sales − Returns − Discounts. Annualised sales are the sum of the last four quarters. Sales growth = (This period − Same period last year) / Same period last year × 100.

Yatırımcı.AI ResearchMethodology