Top line refers to a company’s revenues or gross sales.Therefore , when company has top line growth, the company is experiencing an increase in gross sales or revenues which basically gives a company an amount from the sale of product or services before the expenses.
Top line is a number that represents a company’s gross revenue or sales from products or services; this figure is so-named because it appears at the top of an income statement. The United States Securities and Exchange Commission compares an income statement to a staircase with total revenue during a specific accounting period at the top, the steps below that show deductions for various costs or other operating expenses associated with earning the revenue, and the final step as the bottom line, or net income, after all the deductions are made.
Top line growth, refers to an increase in the company revenue profit from the sales of their product in the respective market and it shows how much the company generating sales in the market.However, the top line does not take into account operating efficiencies and costs that affect a company’s bottom line, or net profits, which appears on the bottom line of an income statement.
Bottom line is different from the top line, as top line is the gross sales or revenues outcome without any expenses, but in bottom line it is the net profit of the sales after compensating the capital investment, yet it is possible for the company to experience both the top line as well as bottom line growth simultaneous if it keeps operating costs in check.
A company may report top-line growth but not bottom-line increases, or vice versa, in a given period, however the top and bottom lines — as well as the numbers in between — are crucial in determining a company’s financial health.
According to the American Management Association (AMA), revenue growth that is based on “customer benefit” is more likely to improve top line growth. The association defines customer benefit as the advantage customers gain from their experience of selecting and using a particular product or service. This is because when a product offers customers value, they are willing to pay more and play a bigger role in making the product profitable.