Top Line Vs Bottom Line
Top Line Growth
Top line is the company’s growth sales or the revenue and when we say top line growth it is referred to as the company’s indication on an increase in its revenue or gross sales. The figure for sales or revenue of company appears on the top of income statement. When you hear about companies focusing on their top line, this simply means that the companies are stressing over the need to increase the company’s sales or revenue.
Bottom Line Growth
The bottom line for a company is referred as the net profit which comes on the bottom of the income statement. The figure is derived after reducing all the expenses from the company’s revenue.
If the company, is generating higher sales whilst cutting down on its costs, can be said as the company is improving on its bottom line. Bottom line growth can be realized when the company finds a new supplier for input material resulting in cost saving of some amount.
Two ways can be opted to increase their bottom line:
- Increase revenue or generate top line growth
- Increase efficiency by cutting down on costs
How important are the top and bottom line growth for a company
Both top and bottom line growth metrics are essential for knowing the financial condition of a company. Top line highlights the company’s capability in the area of sales generation; it does not factor in operating efficiencies. Whereas, the bottom line highlights how efficiently the company is able to manage its operational costs and other expenses. It also highlights how the company controls total costs.
Company can experience both top line and bottom line at the same time by increasing its revenue and reducing its operational costs, as these two are not interchangeable.
- Both top line and bottom line values are useful in determining the financial condition of the company Both are not interchangeable
- Bottom line highlights how efficient a company is with its spending and managing its operating costs
- Top line highlights how effective a company is at generating sales and revenue and does not take into consideration operating efficiencies; this can have a dramatic impact on the bottom line