Loading the player...
A:

A company's bottom line is its net income, or the "bottom" figure on a company's income statement.

More specifically, the bottom line is a company's income after all expenses have been deducted from revenues. These expenses include interest charges paid on loans, general and administrative costs and income taxes. A company's bottom line can also be referred to as net earnings or net profits.

The top line refers to a company's gross sales or revenues. Therefore, when people comment on a company's "top-line growth", they are making reference to an increase in gross sales or revenues.

For example, a company would be experiencing top-line growth if a new advertising campaign caused a 15% increase in sales for its widgets, which resulted in an increase of $2 million to the revenue. Bottom-line growth would occur in a situation where a company found a new supplier for raw materials that results in a cost savings of $4 million.

Both these figures are useful in determining the financial strength of a company, but they are not interchangeable. Bottom line describes how efficient a company is with its spending and operating costs and how effectively it has been controlling total costs. Top line, on the other hand, only indicates how effective a company is at generating sales and does not take into consideration operating efficiencies which could have a dramatic impact on the bottom line.

However, this is not to say that a company cannot experience both top-line and bottom-line growth at the same time. This can be achieved if a company earns more revenue (top line) and reduces its operating costs (bottom line).

(To learn more, see Understanding The Income Statement.)

RELATED FAQS
  1. How is the bottom line increased or decreased?

    Find out about the bottom line and how changes in sales revenue or expenses can cause a company's net profit to increase ... Read Answer >>
  2. Is operating profit the same as net income?

    Understand the difference between operating profit and net income, including how each type relates to the other and how both ... Read Answer >>
  3. How can I find net margin by looking a company's financial statements?

    Learn how to calculate a company's net margin using financial statements by dividing the company's net revenues by its net ... Read Answer >>
  4. What is the difference between earnings and revenue?

    Understand how a company makes revenue and how it makes earnings. Learn the difference between revenue and earnings and how ... Read Answer >>
  5. What is the difference between revenue and profit?

    Understand the difference between revenue and profit, two key concepts in business accounting, including where each can be ... Read Answer >>
  6. What does the bottom line figure illustrate?

    Learn about net profit, why it is referred to as the bottom line and what this figure illustrates about a company's profitability ... Read Answer >>
Related Articles
  1. Investing

    Comparing Bottom Line And Top Line Growth

    Both figures can determine a company’s financial strength, but they are not interchangeable.
  2. Investing

    Understanding the Income Statement

    The best way to analyze a company—and figure out if it's worth investing in—is to know how to dissect its income statement. Here's how to do it.
  3. Investing

    What's the Bottom Line?

    The bottom line refers to the last line on a company’s income statement. This line shows net profit after all expenses, depreciation and taxes have been deducted from revenue. This is in contrast ...
  4. Investing

    What Is The Difference Between Revenue And Profit?

    Think of revenue as the top line of a company’s income statement. Profit is the infamous bottom line.
  5. Investing

    Understanding the Top Line

    Top line refers to a company’s gross sales without any reductions for discounts or returns.
  6. Investing

    What Is The Difference Between Revenue And Income?

    The average person uses revenue and income in interchangeable ways. But these terms refer to very specific, and different, concepts.
  7. Investing

    Understanding Profit Metrics: Gross, Operating and Net Profits

    Rather than relying solely on net profit figures to evaluate a company's performance, seasoned investors will often look at gross profit and operating profit as well.
  8. Investing

    Is Net Income The Same As Profit?

    Net income and profit both deal with positive cash flow, but there are important differences between the two concepts.
  9. Investing

    Gross, Operating and Net Profit Margins

    A company’s income statement includes the company’s gross, operating and net profits.
RELATED TERMS
  1. Bottom Line

    Refers to a company's net earnings, net income or earnings per ...
  2. Top Line

    A reference to the gross sales or revenues of a company, or an ...
  3. Revenue

    The amount of money that a company actually receives during a ...
  4. Net Income - NI

    1. A company's total earnings (or profit). Net income is calculated ...
  5. Profit and Loss Statement (P&L)

    A financial statement that summarizes the revenues, costs and ...
  6. Common Size Income Statement

    An income statement in which each account is expressed as a percentage ...
Hot Definitions
  1. Protectionism

    Government actions and policies that restrict or restrain international trade, often done with the intent of protecting local ...
  2. Fiduciary

    A fiduciary is a person who acts on behalf of another person, or persons to manage assets.
  3. Demonetization

    Demonetization is the act of stripping a currency unit of its status as legal tender and is necessary whenever there is a ...
  4. Investment

    An asset or item that is purchased with the hope that it will generate income or appreciate in the future. In an economic ...
  5. Redlining

    The unethical practice whereby financial institutions make it extremely difficult or impossible for residents of poor inner-city ...
  6. Nonfarm Payroll

    A statistic researched, recorded and reported by the U.S. Bureau of Labor Statistics intended to represent the total number ...
Trading Center