Ever heard of the term top line and bottom line being used by financial analysts? So what do these terms refer to and why are they called so.
Starting with top line; it refers to the total sales or revenue generated by a firm.
For e.g. if a firm sells 100 cars/fiscal @ Rs.1,00,000 (oh yes, its the nano!!) then the top line would be Rs.1,00,00,000. (The Math here has been simplified to drive home the point!! ).
Now, say the Net Income (profit) earned on every car is Rs.20,000, then the bottom line would be Rs.20,00,000. (Again, we exclude the effects of Depreciation, Taxes, SG&A and other accounting stuff to keep the math simple).
So why are these terms referred to as they are?
Try reading an income statement of any firm. If you see at the top you would find the Sales/Revenues being shown. Hence, in general usage, Sales/Revenues are referred to as top line because of their close proximity to the top part of an income sheet. If you keep coming down the income statement you will see that there are deductions( depreciation, taxes, interest expenses, etc ) and additions (gain from sale of securities, etc) being made to the top line. After all adjustments are made to the top line, the firm would report its Net Income ( or Profit ) at the bottom of the income statement and hence the term bottom line because of it's close proximity to the bottom of the income statement.
Also commonly referred as
Top line : - Revenue, Sales
Bottom line: - after tax profit, bottom line, net, net profit, profit
4 comments:
Cool info dude... i have done my MBA and only after reading ur blog did i understand why is it called so... they dont teach this in B school.. so u see Blogs are a cool way of disbursing knowledge..
bakki hows ya.. long time since we spoke/met.
I will not acquiesce in on it. I think polite post. Expressly the appellation attracted me to read the sound story.
Good fill someone in on and this mail helped me alot in my college assignement. Say thank you you on your information.
interesting article. I would love to follow you on twitter.
Post a Comment