How to Calculate Annualized Revenue

Annualized revenue is a speculative figure that projects a business' income for an entire year based on its activities during a limited part of that year. Companies sometimes need to calculate annualized revenue for tax purposes, such as for a quarterly tax that includes an exemption if a business' annual sales are lower than a certain amount. Annualized revenue calculations can be a useful tool for getting an idea of what a company's annual sales would be if operations continued much as they are at present. But the concept of annualized revenue incorporates the assumption that revenue will not fluctuate or grow over the course of the year. In this sense it can be an inaccurate indicator.

Instructions

1. Divide the amount of a company's gross receipts during a given period by the number of days in that period in order to calculate its average daily sales. For example, if the company grossed $30,000 over the course of a 30-day month, then its average daily sales would be $1000.

2. Multiply the average daily sales by 365, or the number of days in a year. A business that averages $1000 per day during the period for which business income figures are available would have an annualized income of $365,000.

3. Calculate annualized income using an alternate method by multiplying monthly sales by twelve, or quarterly sales by four. These different methods can produce slightly different results, but it is useful to keep in mind that annualization is a process of estimating sales and is imprecise by its very nature.

References

• Cheval Capital Inc.: Calculation of Annualized Revenue
• Investopedia: Annualize
• Federal Reserve Bank of Dallas: Annualizing Data