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As seen in the above,sales have risen 100%, but in order to generate these sales, the company raised its marketing efforts by 200% for a 243% increase in COGS. These higher costs outweigh the increased sales, which lead to a 9% decrease in earnings. Here are some possible reasons why an increase in revenue can hurt earnings:

Operating Expenses - This is a company's/individual's overhead, or the cost of doing business. As a company/individual attempts to boost sales, it/he may have to pay more employees, lease more office space or buy new equipment to increase production. Unless a company/individual raises its productivity, it may, by increasing sales, simply become bloated. This will lower its margins, which leads to lower earnings.

Marketing Costs - Advertising, free trials, discounts and other promotional material can all be used to increase sales. While these tactics are often effective, they cost money, ultimately affecting the bottom line.

Lower Prices - When a company lowers the price of its product, it can stimulate greater sales. While the price is lower, the amount sold may greatly increase, which lifts revenue. However, if costs are not going down, the company's margins will be smaller, leading to lower earnings.

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