How to Calculate Total Revenue Growth in Accounting?
Original post by Bryan Keythman of Demand Media
The amount of a company's total revenues is the total money it earns from providing its products or services to customers before paying any expenses. In accounting, a company's revenues can be cash sales or sales for which customers pay at a later date. A company reports its total revenue on its income statement, which is a financial statement that shows a company's revenues, expenses and profit. Revenue growth can increase a company's profits and increase value for stockholders. You can calculate a company's total revenue growth using information from two different income statements.
Find a company's income statement in its most recent 10-K annual report and in its previous 10-K annual report. You can obtain these reports from the investor relations section of a company's website or from the U.S. Securities and Exchange Commission's EDGAR database.
Find the amounts of the company's total revenues on each income statement. An income statement may show total revenues as net revenues or net sales, which equal revenues minus refunds and sales discounts. For example, assume the company had $10 million in revenue in the previous year and $12 million in its most recent year.
Subtract total revenue in the previous year from total revenue in the most recent year to calculate the total revenue growth between the two years. In this example, subtract $10 million from $12 million to get $2 million in total revenue growth.
Divide the total revenue growth by the revenue from the previous year. Then multiply the result by 100 to calculate the total revenue growth as a percentage. In this example, divide $2 million by $10 million to get 0.2. Then multiply 0.2 by 100 to get 20 percent. This means the company grew its total revenue by 20 percent from one year to the next.
Tips & Warnings
- Compare a company's total revenue growth percentage with the growth of its competitors. The company that is growing its total revenue at a higher rate may be gaining new customers and achieving a competitive advantage over its peers.
- Principles of Accounting; Chapter Three: Income Measurement; Larry Walther; 2010
- U.S. Securities and Exchange Commission: Beginners' Guide to Financial Statements
- Southern New Hampshire University; Horizontal Analysis; Bryan Bouchard; 2010
About the Author
Bryan Keythman has performed stock investment research and writing for a consulting firm since 2008. He also has prior experience sourcing and underwriting commercial real-estate investment and development opportunities for a commercial real-estate developer. Keythman holds a Bachelor of Science in finance.