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Top line refers to a company’s gross sales without any reductions for discounts or returns. Top line is in reference to a company’s income statement where gross sales is the first line item on the income statement, and thus the “top line.”

Generally, top line is used when companies refer to activity that increases profitability. There are two ways to increase profitability: cut costs or increase revenue. 

Cutting costs is more of a “bottom line” focus because it increases net profits without any increase in sales. This is often the first thing a company does to try to increase profits because it is the easier of the two choices. 

A top line focus to increase revenue is much more difficult because it involves taking business risks to increase marketing, advertising and product development that may or may not result in increased top line revenues.  And in the short run, net profits actually suffer as the added costs of sales efforts flow through the income statement prior to the anticipated future increase in top line revenue.

The term top line is used because it clarifies the type of revenue managers are talking about when they refer to increasing revenue. Companies earn other types of revenue, such as interest, as well as gains on the sale of assets. But when a manager refers to the top line, she means the revenue a company earns in its core business operations.

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