Top Line

Updated on January 4, 2024
Article byRatnesh Sharma
Edited byAshish Kumar Srivastav
Reviewed byDheeraj Vaidya, CFA, FRM

Top Line Meaning

The top line refers to the revenue a business earns 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 net off the sales reversed during the year.

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For eg:
Source: Top Line (wallstreetmojo.com)

The top line revenue is the first thing to consider to assess the performance of any business and is referred to as “top” because of occupying the first spot in the income statements and other financial statements a business prepares.

Top Line Explained

Top line is the most important reference that companies make to understand how effective and productive they have been in a particular financial period. This section of the financial statement signifies the total sales and revenues generated by a business over a period.

For any entity or its stakeholders, the most critical item in the entire set of financial statementsFinancial StatementsFinancial statements are written reports prepared by a company's management to present the company's financial affairs over a given period (quarter, six monthly or yearly). These statements, which include the Balance Sheet, Income Statement, Cash Flows, and Shareholders Equity Statement, must be prepared in accordance with prescribed and standardized accounting standards to ensure uniformity in reporting at all levels.read more is the total sales. It is not the number of goods sold but the “amount” of total revenue generated from the entity’s business. RevenueRevenueRevenue is the amount of money that a business can earn in its normal course of business by selling its goods and services. In the case of the federal government, it refers to the total amount of income generated from taxes, which remains unfiltered from any deductions.read more

means quantity multiplied by the price charged per unit.

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

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

Top line Company

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Example

Let us consider the following example to understand what is top line and how it is calculated:

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 topmost line as follows:

Top-line (gross revenue)

Explanation

Importance

The top line drives the business. Lower sales mean a lower business scale, and higher sales mean a larger business scale. The business compares this scale to what competitors are achieving. As a result, it gets a chance to assess its measures and figure out ways in which it could make them more effective and fruitful. In short, such growth determinants become assessment means for businesses to excel and achieve.

Top Line Vs Bottom Line

The Top Line and Bottom Line play a significant role in defining the achievements of a business through their financial statements. However, these two mentions in the statements differ in many aspects. Some of these differences include:

  • The former revenue covers the total revenue that a business generates and is mentioned on top of the financial statement. On the other hand, the bottom line figure details the earnings after all deductions and is mentioned at the bottom of the financial statement.
  • A business can increase the top line by introducing new product lines, spending more on advertising, and boosting the sale of products, while a business can increase its bottom line by controlling the expenses to be deducted from the total revenue.

This article has been a guide to top line and its meaning. Here we discuss its differences with bottom line along with an example and its importance. You may learn more about financing from the following articles –