If revenue is negative, the company may have lost money during operations or the tag may be incorrect.
This issue tends to surface when someone is doing a massive dive into the data – looking at thousands of companies at a time without consideration of the industry the company is in. It’s very common for companies that are rooted in research (biotechnology and pharmaceutical) or mining to lose money during the course of their operations. They don’t have revenue or will report negative revenue on their income statements.
When looking at a large set, negative revenues can often look like anomalies. When a ticket is sent to the support team, the first thing we look at is the filing with the SEC to determine if the company reported positive revenue and go from there. We also track companies that have either missing revenue or negative revenue, along with cost of revenues, as they tend to be related data points. If we find that the revenue is there and mismapped, we repair the tag. It doesn’t happen often, but generally fixing revenue data tags is very straightforward.
When revenue is fixed, it cascades through the calculations and metrics. Often revenue actually looks correct, but with closer analysis, we find duplicate values (due to the method the filing was submitted with) which will inflate revenue numbers. Once repaired, the system fixing the calculations and the results are typically ready in less than an hour.
FAQs
If revenue is negative, the company may have lost money during operations or the tag may be incorrect.
What does a negative net revenue mean? ›
Once calculated, net income can be either a positive or negative number. In other words, if a company brings in more gross revenue than expenses, the net income is positive. If total expenses exceed revenue, the net income is considered negative, which is known as a net loss.
Why are sales negative on an income statement? ›
Net Income (aka Net Sales, or the bottom line)
If your total expenses outweigh your revenue, your net income will be in the negative.
How is total revenue negative? ›
In some rare cases, companies do report negative revenue. A negative value may be related to a change in accounting principles.. The accounting change alters the way the company places a value on money or assets. Despite changes in the books, the negative value may not represent a real decrease in revenue.
What is negative revenue called? ›
When the value of net profit is negative, then it is called a net loss. This usually occurs in the case of new businesses that do not earn enough to pay off their overhead costs or income taxes.
Can a revenue function be negative? ›
In real world cases the revenue function has a negative coefficient for the quadratic term and is a downward facing parabola. The simple model for revenue is revenue =quantity*price.
How do you explain negative net income? ›
Negative net income means the company has incurred more expenses than its revenue, resulting in a loss. A negative net income can indicate that the company is struggling financially and may be unable to cover its obligations.
Can you have negative gross revenue? ›
If a company experiences a sudden decline in revenue or an increase in costs of goods sold, a negative gross profit margin can result.
What does it mean when income is negative? ›
"Negative income" typically refers to a situation where an individual or entity's total expenses exceed their total income, resulting in a net loss.
Why are sales recorded as a negative? ›
If it's positive, the company is owed money. If it's negative, the company owes money. Accounts receivable are considered negative when a business owes more money to the creditors than it has cash available on hand. The primary reason is because the business has made more sales on credit than it can afford to pay back.
When a customer returns a product, businesses will give them a refund and update their accounting records. The refund will be recorded as a negative number in the sales revenue account, or businesses can use the sales return account.
What does a negative balance mean? ›
A negative credit card balance is when your balance is below zero. It appears as a negative account balance. This means that your credit card company owes you money instead of the other way around. Typically, this happens when you've overpaid your outstanding balance or if you've had a credit returned to your account.
Why can revenue be negative? ›
A negative revenue figure may mean that you had to credit a customer or customers for more than you sold in a given period. Example: In January, you recorded $10,000 in revenue (this would show up as a positive figure, as it should). In February, you bill $4,000 in services to Client B.
Why is revenue a negative number? ›
The revenues are reported with their natural sign as a negative, which indicates a credit. Expenses are reported with their natural sign as unsigned (positive), which indicates a debit. This is routine accounting procedure.
Can average revenue be negative? ›
(iii) Marginal revenue can be zero or negative but average revenue can never be negative.
Why is cost of revenue negative? ›
If there are sales, there are going to be associated costs because sales revenue cannot happen without any cost. So, if the cost of goods is negative, there is either an error in recording costs or fraud is being committed to only record sales.
What if your income is negative? ›
Businesses with negative income may be subject to specific reporting requirements, tax implications, or potential bankruptcy considerations. Individuals with negative income may face challenges in meeting financial obligations, accessing credit, or incurring tax consequences.
Can tax revenue be negative? ›
In economics, a negative income tax (NIT) is a system which reverses the direction in which tax is paid for incomes below a certain level; in other words, earners above that level pay money to the state while earners below it receive money, as shown by the blue arrows in the diagram.
