Revenue vs Income Calculator
What this tool calculates
Revenue and income are not the same number. Revenue is the total money coming in. Income is what you keep after expenses. This calculator shows you exactly where the money goes between those two figures, broken into three tiers of profitability.
Gross profit is revenue minus the direct costs of delivering your product or service (COGS). It tells you how much you earn before overhead kicks in.
Operating profit (EBIT) is gross profit minus operating expenses like payroll, rent, marketing, and SaaS subscriptions. This is earnings before interest and tax, and it shows how profitable the core business is.
Net income is the bottom line. Subtract taxes and interest from operating profit and you have the actual profit your business keeps. This is the number investors and lenders look at.
How income statements work
An income statement reads top to bottom. Revenue sits at the top. Each tier subtracts a category of expenses until you reach net income at the bottom.
The flow:
- Revenue (total sales)
- Minus COGS = Gross Profit
- Minus Operating Expenses = Operating Profit (EBIT)
- Minus Taxes and Interest = Net Income
Each step also produces a margin percentage. Gross margin, operating margin, and net margin tell you what share of every dollar of revenue survives each layer of expenses. Margins are more useful than raw dollar amounts when comparing across time periods or against competitors of different sizes.
For a deeper walkthrough of each term, see our guide on revenue vs income.
Key margins explained
Gross margin shows how efficiently you produce your product or service. A company with $500,000 in revenue and $350,000 in COGS has a 30% gross margin. If this number is low, your direct costs are eating most of your revenue before you even pay rent.
Operating margin factors in the cost of running the business. Marketing, payroll, office space, and software all come out here. A healthy operating margin means the business can sustain itself without relying on outside funding.
Net margin is the final measure. It includes taxes and debt service. A 10% net margin means you keep $0.10 of every dollar you earn. Anything above 20% is strong for most industries. A negative net margin means you are spending more than you earn.
Common income statement mistakes
Mixing up gross profit and net income is the most frequent error. A business can have a 60% gross margin and still lose money if operating expenses are too high.
Forgetting non-operating expenses is another common gap. Taxes and interest payments are real costs that reduce your actual take-home profit. Ignoring them overstates how much your business actually earns.
Finally, comparing raw dollar amounts across companies of different sizes is misleading. Use margin percentages instead. A $10M company with a 15% net margin is more profitable in relative terms than a $50M company with a 3% net margin.
Frequently Asked Questions
What is the difference between revenue and income?
Revenue is the total money your business generates from sales before any expenses. Income (net income) is what remains after subtracting all expenses — COGS, operating expenses, taxes, and interest.
How do you calculate gross profit margin?
Subtract your cost of goods sold from revenue, then divide by revenue and multiply by 100. For example, $500,000 revenue minus $350,000 COGS gives a gross profit margin of 30%.
What is a good net income margin?
Net income margins vary by industry. Most businesses aim for 5-20%. A margin above 20% is strong. A negative margin means expenses exceed revenue.