Top Line

Top Line Definition

Top line is the revenue earned by the business by selling goods or services and is reported in the income statement for a defined period (monthly, quarter, semi-annual or yearly). Further, it is calculated after deducting the discounts given to the customer and also net off the sales reversed during the year.

Explanation

For any entity or its stakeholders, the most critical item in the entire set of financial statements is the total sales. It is not the number of goods sold, but the “amount” of total revenue generated from the business of the entity. Revenue means quantity multiplied by the price charged per unit.

We treat the increase in sales growth as growth in the top line. Other income earned is not linked to the primary business, and therefore, it is not included.

Please see below some of the top companies as examples and what forms their top line.

Top line Company

How to Analyze and Calculate Top Line?

Let’s have an example:

You can download this Top Line Excel Template here – Top Line Excel Template

Income Statement: Amount in $ Million

Top-line (statement of Income)

We can calculate the top line as follows:

Top-line (gross revenue)

Explanation

Why Top Line Matters?

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