Introduction
Turnover (also known as net sales) refers to the revenue of a business firm from sales within a certain period of time. For example, if a company sells 100 items at $ 60 each , then total turnover of the company is $ 6000. On the other hand, profit refers to the financial gain or money left after deducting all variable and fixed expenses and taxes from turnover.
Key Differences Between Turnover And Profit
The main dissimilarities or difference between turnover can be described as follows:
1. Meaning
Turnover: It is a total amount of money a company makes by selling products or services within a specific period
Profit: It is a total amount of money a company saves after deducting all expenses from turnover
2. Represents
Turnover: It represents total revenue generated from sales
Profit: It represents total earnings after subtracting all the expenses
3. Formula
Turnover: It can be determined by using following formula:
Turnover = Total Number Of Unit Sold X Per Unit Selling Price
Profit : It can be calculated by using following formula:
Profit = Total Revenue (Turnover) - Cost Of Goods Sold
4. Reflect
Turnover: It shows efficiency of business operations
Profit: It shows the financial health
5. Position In Income Statement
Turnover: It appears at the top of the income statement
Profit: It appears at the bottom of the income statement
6. Affected By
Turnover: It is affected by demand, sales volume , price etc.
Profit: It is affected by operational efficiency, tax rate, expenses etc.
Turnover Vs Profit (Comparison Table)
|
Basis For Difference |
Turnover |
Profit |
|
Represents |
Total revenue generated from sales |
Money left after deducting all expenses |
|
Formula |
Units sold X Selling price |
Turnover – Cost of goods sold |
|
Reflects |
Scale of operation |
Financial health |
|
Affected By |
Sales, demand, price |
Efficiency, tax, costs |
|
Appear in income statement |
At the top |
At the bottom |
Distinction Between Turnover And Profit Explained In Short
* Turnover indicates total sales of a business within a specific period but profit reflects the earnings left after deducting all the expenses from total turnover.
* Turnover measures the sales volume. On the other hand profit measures earnings for the specific period of time.
* Turnover shows business efficiency and profit shows financial efficiency of the firm
* Turnover is reported on the top line of the financial statement but profit is positioned in the bottom line.
