Revenue is the dollar amount received by a company for the goods and services it sells. Revenue is sometimes referred to as sales, but the latter may occur before the revenue is booked, as when a sales rep receives a purchase order but the product has yet to be delivered to the customer. Total operating revenue is one component of a company's sales, the other being nonoperating revenue. Total operating revenue provides a significant measure of a company's financial strength.
Operating versus Nonoperating Revenue
Operating revenue is earned from sales of the products or services that the company exists to sell, while nonoperating revenue is income received from other sources, including one-time transactions such as the sale of property or out-of-date inventory. Nonoperating income can also include interest earned on investments; charges to customers, such as late payment fees; and revenue received from licensing and royalties. Nonoperating revenue is any income not realized on a day-to-day basis. While the distinction between operating and nonoperating revenue may seem straightforward, some transactions are hard to define. Service income received from installation and maintenance of equipment might be considered operating revenue if it is routinely earned, but if it is not part of routine business, it would not be. The ratio of operating to nonoperating revenue reveals important information about a firm's stability. Too much nonoperating revenue might suggest the company's day-to-day business lacks strength.