Difference between Turnover and Income

Key Difference: Sales turnover is the amount of money that is earned by a company after selling its products/services. Profit of a company, the earnings of the company after all the costs has been deducted.

The terms turnover and income are often confusing because of its many synonyms. Each company uses its own terms on their financial statement resulting in more confusion. In many contexts, turnover is synonymous is revenue and sales. While, income can be divided into two gross income (also known as gross earnings, pre-tax profit) and net income (or net earnings, after-tax profit).

Turnover is the ability of a company to burn through assets. The term turnover can be referred to in a context of three things: Sales, Labor and Inventory.

Sales turnover refers to the amount garnered by a company from the sale of goods and services. Sales turnover is calculated by multiplying number of products sold into price of the product (market value). Sales turnover does not include the number of goods that were returned or donated. It just takes into account the number of units sold.

Labor inventory refers to the number of employees that are hired, fired or leave on the own. It is the number of people that the company goes through. A high labor inventory is more expensive to the company, as training costs increase. This results in lower revenue or income.

Inventory turnover is the number of times a company’s inventory is sold and replaced with new stock. Inventory is expected to have a higher inventory ratio, or the rate at which the inventory is completely finished. However, inventory ratio analysis also heavily depends on type of industry.

Income is the amount of profit a company makes after all of its costs have been deducted. However, income can be divided into two sub categories: Gross income and net income. Gross income, also known as pre-tax income basically states that revenue – costs (everything but tax) is gross income. This is the income on which the tax will be charged. Net income, also post-tax income is just gross income – taxes. This is amount the company can finally call its own to do with what it wants. It can either reinvest the money or distribute it among the shareholders.

Comparison between Turnover and Income:

 

Turnover

Income

Definition

Sales turnover is the amount of money that is earned by a company after selling its products/services

Profit of a company, the earnings of the company after all the costs has been deducted

Types

Sales, Inventory, Labor and

Cash

Gross Income and Net Income

On financial statement

Top line

Bottom line

Image Courtesy: diffen.com

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