Underlying Vs Statutory revenue

The revenue generated by a company is a crucial indicator of its financial well-being. It is the money a company earns from selling goods or services, and it is used to pay for expenses and investments.

There are two types of revenue: Underlying revenue and Statutory revenue.

Underlying revenue is the revenue generated by a company's primary business operations. It is the revenue that a company would earn if it only sold its core products or services. For example, if a company that sells computers also offers repair services, the underlying revenue would only include the revenue from computer sales.

Statutory revenue refers to the revenue that an organization lawfully discloses to governing bodies. It includes all the revenue that a company earns, including from non-core activities such as investments, interest income, and other sources.

Difference between Underlying revenue and Statutory revenue.

The difference between underlying revenue and statutory revenue can be significant. For example, a company that earns a significant amount of revenue from non-core activities may have a high statutory revenue, but its underlying revenue may be much lower. This can give investors a false impression of the company's financial health. An essential contrast between the two forms of income is the manner in which they are documented, without copying content from other sources.

Underlying revenue is typically reported in a company's income statement, which shows the revenue and expenses related to its core business activities.

Statutory revenue, on the other hand, is reported in a company's financial statements, which include all the revenue and expenses of the company.

Investors and analysts should pay close attention to a company's underlying revenue to get a clear picture of its financial health. A company with strong underlying revenue is more likely to be able to sustain its growth and pay its expenses. However, it is important to also consider a company's statutory revenue to understand its overall financial position.

Underlying And Statutory Revenue may appear alike, but they possess unique disparities and benefits. In this article, we will discuss the advantages of Underlying and Statutory Revenue and how they can help a business.

Advantages of Underlying Revenue

• Provides an accurate representation of a company's core operations: Underlying Revenue helps in assessing the true financial performance of a company. It provides a clearer understanding of the revenue generated by a company's primary business activities, which is essential for investors, analysts, and stakeholders.
• Eliminates distortions caused by exceptional items: One-off or exceptional items can significantly distort a company's financial performance. By eliminating these items, Underlying Revenue provides a more accurate and reliable reflection of a company's financial performance.
• Helps in forecasting future financial performance: As Underlying Revenue provides a clear picture of a company's core operations, it can help in predicting future financial performance. This is because exceptional items are often unpredictable, and removing them can give a more consistent picture of a company's revenue.

Advantages of Statutory Revenue

• Ensures compliance with regulatory requirements: Statutory Revenue is used to calculate taxes and regulatory fees. Reporting accurate and complete Statutory Revenue is essential for a company to comply with regulatory requirements.
• Provides a comprehensive overview of all sources of revenue: Statutory Revenue includes all sources of revenue generated by a company, including exceptional items. A more holistic understanding of a company's financial performance can provide advantages to both investors and stakeholders.
• Allows for easier comparison between companies: As Statutory Revenue is a standardised metric, it allows for easier comparison between companies. This can be helpful for investors who want to compare the financial performance of different companies in the same industry.

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