Top Line Vs Bottom Line of Business

 

Top Line and Bottom Line of any business is always important and it is a strategy decided by the management during a particular time which area to focus or what is the growth required in both parameter's,

Top Line : It is the first line item in the income statement. It is referred to the revenue generated by any business during a specific time period . Mainly the sales revenue.

Bottom Line : It is showing the profit of the business after all expenses . It shows how we manages our operating expenses to get the revenue.

Bottom line can be achieved when there a top line . Both parameter's are interrelated . Both are important for the business to grow and survive . But there has to be balance for each other. It is the decision of the management which area to focus to gain grown in either one parameter or look for a balanced growth.

Mostly in traditional companies there will be a proportionate growth in top line and bottom line . Mainly because the operating expenses is more or less constant and when there is a growth in revenue the profit also increases in absolute values. In case of startup companies the operating cost will be higher during the initial period to achieve the revenue . In most of the startup focus on gaining the top line first and them focus on the bottom line in a later stage . This also depends on how long they can survive with low or negative bottom line.

When ever there is a diversification and acquiring more customers or geography there will be always a gain in top line and a dip in bottom line . It is healthy for a business to plan for the top line and bottom line based on the situation and strategy they adopt during a particular time. Bottom line can be achieved by consolidating the operating expenses and optimizing's the cost structure after achieving a reasonable top line.

Both top line and bottom line are equally important and it is the life line of any business.