Revenue

Revenue is the monetary value of everything a company sold to its customers over a period — goods, services and work performed — before deducting the cost of sales, selling expenses, interest on debt and taxes. It is the very first line of the income statement, from which expenses are subtracted one after another on the way down the report, which is why it is called the top line.

Timing of recognition: transfer of control, not cash

Revenue is recognised when the customer obtains control of the goods or services, not when the money arrives in the bank account. Goods shipped on deferred payment terms are already revenue and, at the same time, accounts receivable. The reverse situation is just as common: an advance payment brings in cash but creates no revenue until the obligation has been fulfilled. This is the source of the gap between revenue and cash, which is analysed through the change in working capital.

In a group's financial statements, only sales to external customers count as revenue: intra-group transactions are eliminated on consolidation, otherwise a sale between two plants belonging to the same holding company would be counted twice. Further down the statement, the cost of sales is subtracted from revenue to arrive at gross profit, and its share of revenue is the gross margin. Revenue itself underpins the valuation multiples P/S and EV/Sales, which are used where there are no profits yet but there are already sales.

An example using the site's data

Magnit's revenue for the latest reporting period is 412 000 000. For a retailer, this covers almost all of its business activity: the chain sells its own goods, so revenue reflects the full receipt amount rather than just the markup.

Where the term misleads

The main substitution is the agency model versus principal trading. A marketplace or a distributor may report as revenue either the entire turnover of the goods sold through it or only its own fee. Switching from one approach to the other changes the top line several times over without changing the business at all; formally this is disclosed as a change in accounting policy, and a year-on-year comparison across such a boundary loses its meaning.

The second case is exporters. Their revenue is translated into roubles, and the line grows with unchanged physical shipments simply because of the exchange rate; separately from this, the report carries foreign exchange differences. That is why the revenue trend of a commodity company is read together with production volumes and the exchange rate, rather than as a standalone fact of sales growth.