What Is Operating Revenue?

Operating revenue is the revenue that a co꧃mpany generates from its primary business activities. 

For example, a retailer produces its operating revenue through merchandise sales; a physician derives their operating 𒁏reven🌳ue from the medical services that they provide. What constitutes operating revenue varies based on the business or the industry. 

Understanding Operating Revenue

Distinguishing operating revenue from total revenue is important because it provides valuab﷽le information about the productivity and profitability of a company's primary business operations. 

Despite the faไct that operating revenue is recorded separately on financial statements, some firms may attempt to mask decreases in operating revenue by combining it with non-operating revenue. Understanding and identifying the sources of revenue is helpful in assessin🔴g the health of a firm and its operations. 

Operating Revenue vs. Non-Operating Revenue

澳洲幸运5开奖号码历史查询:Non-operating revenue is revenue generated by ౠactivities outside of a company's primary operඣations. This type of revenue tends to be infrequent and oftentimes unusual. Examples of non-operating income include interest income, gains from the sale of assets, lawsuit proceeds, and revenues from other sources not connected to operations. 

For example෴, a private university may classify tuition received as operating revenue, whereas gifts from alumni are considered non-operating revenue (because they are not expected nor are they part of🐎 ordinary university operations).

In this example, the university's 澳洲幸运5开奖号码历史查询:income statement lists oཧperating revenue and profit from operations first, then it posts non-operating reven🌟ue and profit, such as revenue received from gifts and legacy donations. This presentation of information informs those reviewing the company's financial records that the gift is not an ordinary part of the university's business. It is important to distinguish the difference because non-operating revenue can change drastically from year to year.

Special Considerations

Cash Flow

Non-operating revenue and income do not produce 澳洲幸运5开奖号码历史查询:cash inflows that are consistent from one year to the next, which is another reason why the activity is separately identified in the income statement. For a company to fund company operations, the business must gener🌱ate operating revenue. Firms that drive operating revenue can fund the business regularly without the need to seek additional financing, and these companies can operate with a lower cash balance.

For example, a company may sell a 澳洲幸运5开奖号码历史查询:fixed asset, such as a building, in the current year. If the building is sold at a gain, the gain will be treated as non-operating revenue in the year it was sold𒁏. This revenue is not expected as a normal course of doing business, and the one-time revenue should not be used to assess the success of the company's primary operations year over year.

Stock Prices

For a successful company, operating revenue and income are the primary sources of 澳洲幸运5开奖号码历史查询:earnings per share (EPS); this ratio🔴 is a key statistic for evaluating a firm's stock price.

EPS is defined as earnings available to common shareholders divided by 澳洲幸运5开奖号码历史查询:common shares outstanding. A well-managed business can grow operating revenue and income by finding more customers and moving into neღw markets that generate higher earnings. As EPS increases, many investors and analysts consider the stock to be more valuable and the stock price increases.