Revenue is the money from selling goods and services, without VAT. Income is revenue plus other receipts, such as interest on a deposit.
Profit is what remains after all expenses and tax. EBITDA is profit before interest, tax and depreciation: it shows what the business itself earns. On €500,000 of revenue, net profit can be just €52,350.
Below: plain definitions, a worked example of a Spanish SL from revenue down to net profit, what EBITDA is and how it differs from EBIT, what these lines are called in Spanish accounts, what margin means and why a company can be profitable with no cash in the bank.
Revenue, income and profit in plain terms
- Revenue — what the company received for its goods and services from its main activity. Without VAT: the company collects VAT for the tax agency, it is not the company’s money.
- Income — broader than revenue: revenue plus other receipts that increase the company’s equity, such as deposit interest, the sale of old equipment or exchange gains. In everyday speech “income” is often used to mean revenue, and that is the main source of confusion.
- Profit — income minus expenses. Profit has several levels: gross, operating, before tax and net. When people say “profit” without qualification, they usually mean net profit — after all expenses and corporate tax.
The key difference: revenue shows how much a company sold, profit shows how much it earned from it. A company can grow its revenue and still make a loss.
From revenue to net profit: a Spanish SL example
An illustrative SL distributing equipment. Over the year it invoiced €605,000, of which €105,000 was 21% VAT passed on to the tax agency. Its revenue is €500,000.
| Line | Amount | Share of revenue |
|---|---|---|
| Revenue | €500,000 | 100% |
| Cost of sales: goods purchased | −€200,000 | |
| Gross profit | €300,000 | 60% |
| Salaries and social security contributions | −€150,000 | |
| Rent, marketing, other expenses | −€60,000 | |
| EBITDA | €90,000 | 18% |
| Depreciation of equipment and vans | −€20,000 | |
| Operating profit (EBIT) | €70,000 | 14% |
| Deposit interest | +€5,000 | |
| Loan interest | −€10,000 | |
| Profit before tax | €65,000 | 13% |
| Corporate tax | −€12,650 | |
| Net profit | €52,350 | 10.5% |
- This SL’s income for the year is €505,000: €500,000 of revenue and €5,000 of deposit interest.
- Corporate tax is calculated at the 2026 rates for a company with turnover under €1m: 19% on the first €50,000 (€9,500) and 21% on the remaining €15,000 (€3,150). The standard rate is 25%, or 23% for turnover under €10m.
- Of the €605,000 that reached the company’s account, €500,000 of revenue belongs to it, and it earned €52,350.
What EBITDA is
EBITDA stands for Earnings Before Interest, Taxes, Depreciation and Amortization.
It strips out of profit what depends not on the business itself but on how it is financed (interest), where it pays tax (tax) and how much was once invested in equipment (depreciation).
EBITDA = Net profit + Corporate tax + Interest paid − Interest received + Depreciation and amortisation
In the example: 52,350 + 12,650 + 10,000 − 5,000 + 20,000 = €90,000. You get the same from the top: revenue minus cost of sales and operating expenses excluding depreciation.
What it is used for:
- Comparing two businesses with different loans and equipment — for example, a café bought with a loan and a café with no debt.
- Valuing a business you are buying. A going business is often valued as a multiple of EBITDA; how that works is covered in How to value a business for sale.
- Talking to a bank. Banks look at how many times debt exceeds EBITDA: it shows how many years the business would need to repay it.
EBITDA vs EBIT and operating profit
| Measure | What is deducted from revenue | In the example |
|---|---|---|
| Gross profit | Cost of sales only | €300,000 |
| EBITDA | Cost of sales and operating expenses, except depreciation | €90,000 |
| EBIT (operating profit) | Depreciation as well | €70,000 |
| Profit before tax | Interest as well (net of interest received) | €65,000 |
| Net profit | Corporate tax as well | €52,350 |
In practice EBIT and operating profit are almost the same thing: profit from the main activity before interest and tax.
The difference between EBITDA and EBIT is exactly depreciation and amortisation.
Where EBITDA misleads
- It ignores spending on equipment. A garage or hotel that needs a refit and new equipment every few years looks better on EBITDA than it really is. The cash for that spending goes out, but EBITDA does not show it.
- It is not an official measure. Spanish accounts have no EBITDA line — it is calculated by hand, and everyone can calculate it their own way.
- The seller’s “adjusted” EBITDA. A business seller often shows EBITDA “excluding one-off costs” and “allowing for potential”. When buying, EBITDA is recalculated from bank statements and tax returns, and each adjustment is checked separately.
What these lines are called in Spanish accounts
In Spain companies prepare the profit and loss account (cuenta de pérdidas y ganancias) under the General Accounting Plan — Plan General de Contabilidad. Its lines are:
| In English | In Spanish accounts |
|---|---|
| Revenue | Importe neto de la cifra de negocios |
| Operating profit (EBIT) | Resultado de explotación |
| Financial result (interest) | Resultado financiero |
| Profit before tax | Resultado antes de impuestos |
| Corporate tax | Impuestos sobre beneficios |
| Net profit | Resultado del ejercicio |
Gross profit and EBITDA have no line of their own in the statement: they are calculated from its lines.
An SL files the statement with the Commercial Registry as part of its annual accounts, so the figures can be checked both for a seller and for a future partner.
Margin and profitability: what counts as good
Margin is the same profit expressed as a percentage of revenue. In the example the gross margin is 60%, the EBITDA margin 18% and the net margin 10.5%.
There is no single norm: it depends on the sector. Trading lives on low margins and high volume, consulting and software on high margins.
Guides for particular sectors are in our breakdowns: bars typically keep a net margin of 5–15% of revenue (Buying a café or bar in Spain), and the average margin for mechanical workshops is about 6% (Car repair garage in Spain).
Margins are worth comparing with businesses of the same sector and size.
Why a company can be profitable with no cash
Profit and cash in the bank are different things.
Profit is calculated on an accruals basis: a sale goes into revenue on the invoice date, even if the customer pays three months later. So a company with good profit can lack the cash to pay salaries.
- Customers pay late — there is revenue but no cash yet.
- Cash is tied up in stock — goods are bought but not yet sold.
- Loan principal is being repaid — only the interest is an expense, but the payment to the bank is larger.
- Equipment has been bought — only the year’s depreciation is an expense, but the whole price was paid at once.
To see this in advance, a cash-flow plan is kept alongside the profit and loss account — it is part of a financial model.
Whether an investment will pay off is shown by NPV and the payback period: they are calculated on cash, not profit.
How an SL owner should take out what the company has earned — salary or dividends, and how much goes in tax — is covered in Salary or dividends from a Spanish SL.
Frequently asked questions
What is the difference between revenue and profit?
Revenue is all the money from sales without VAT; profit is what remains after expenses. In the article’s example, revenue of €500,000 leaves a net profit of €52,350. A company can grow its revenue and still make a loss.
What is the difference between revenue and income?
Revenue is what comes from the main activity: selling goods and services. Income is broader: revenue plus other receipts — deposit interest, the sale of equipment, exchange gains. In everyday speech the two words are often mixed up.
What is the difference between income and profit?
Income is everything the company received; profit is income minus expenses. If income is €505,000 and expenses including tax are €452,650, net profit is €52,350.
What is EBITDA in simple terms?
It is profit before interest, corporate tax and depreciation. It shows what the business itself earns, regardless of loans, the tax rate and past spending on equipment. EBITDA is used to compare and value businesses.
What is the difference between EBITDA and EBIT?
Depreciation and amortisation. EBIT is operating profit after depreciation; EBITDA is before it. In the example, EBITDA is €90,000, depreciation €20,000 and EBIT €70,000.
What is the EBITDA margin?
It is EBITDA as a percentage of revenue. With EBITDA of €90,000 and revenue of €500,000, the EBITDA margin is 18%. It is worth comparing with businesses in the same sector.
Is VAT included in revenue?
No. The company collects VAT from customers and passes it on to the tax agency, so revenue is counted without it. If €605,000 was invoiced with 21% VAT, revenue is €500,000.
Why is a company profitable but has no cash?
Profit is calculated on accruals, cash on actual payments. Customers paying late, money tied up in stock, loan principal being repaid and equipment purchases all take cash without reducing the year’s profit.
Key points about revenue, income, profit and EBITDA
- Revenue is sales without VAT, income is revenue plus other receipts, profit is income minus expenses.
- Profit has several levels: gross, EBITDA, operating (EBIT), before tax and net.
- EBITDA shows what the business itself earns and is used to compare and value businesses, but it ignores spending on equipment.
- Spanish accounts have no EBITDA line — it is calculated from the profit and loss account.
- Profit is not cash in the bank: cash needs its own cash-flow plan.
