Do you want to know about Bottom Line Growth Vs Top Line Growth? What’s its mean and difference?
The top line and bottom line are two of the most important lines on the income statement for a company. The top line refers to a company’s revenue, which is also called gross sales. If a business has had an increase in gross sales or revenue, it is called “Top-Line Growth.” This indicates how effectively a company is at generating sales. It does not take into consideration operating efficiencies, which could have a dramatic effect on the bottom line.
The bottom line is a company’s net income, or the “bottom” figure on a company’s income statement. You’ve heard the phrase “So the bottom line is…” When you hear this, you know that the person wants you to cut the crap. They want to know where they stand given all other variables.
More specifically, the bottom line is a company’s income after all expenses have been deducted from the revenue. Expenses can include interest charges paid on loans, general and administrative costs, and income taxes, etc. A company’s bottom line can also be referred to as net earnings or net profits. The bottom line illustrates how efficient a company is with its spending and in managing its operating costs.
Both the top-line and the bottom-line figures are useful in determining the financial strength of a company. But they are not interchangeable.
Bottom Line Growth Vs Top Line Growth Main Differences
The most profitable companies typically grow both their top and bottom lines. Understanding what drives both the top and bottom lines can help investors determine whether a company’s management is growing its sales and revenue and managing expenses efficiently.
If “The Bottom Line” is “The Bottom Line”, how can we increase it?
There are many moving parts to a financial statement. Management can enact strategies to increase the bottom line. They can start by increasing the top line by:
- Increasing production
- Lowering sales returns through product improvement
- Expanding product lines
- Increasing prices
- Increasing Other Income, such as investment income, interest income, rental, or co-location fees collected, and the sale of property or equipment, also increase the bottom line.
A company can increase its bottom line through the reduction of expenses by:
- Using different input goods or more efficient methods of obtaining them
- Decreasing wages and benefits
- Operating out of less expensive facilities
- Utilizing tax benefits
- Limiting the cost of
From an accounting standpoint, the bottom line of a company does not carry over from one period to the next on the income statement. Accounting entries are performed to close all temporary accounts including all revenue and expense accounts. Upon the closing of these accounts, the net balance, or the bottom line, is transferred to retained earnings.
The bottom line figure, or net income, can be spent in a number of different ways by a company’s executives. The bottom line can be used to issue payments to stockholders in the form of dividends as an incentive to maintain ownership. Alternatively, the bottom line can be used to repurchase stock and retire equity. Or perhaps a company may keep all earnings reported on the bottom line to utilize in product development, location expansion, or other means of improving the company.