WHAT IS BOTTOMLINE AND WHAT IS TOPLINE?
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Answer Posted / simran
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).
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