Updated on March 11, 2023
Top line refers to the gross sales or revenues of a company. It is the total income generated during a particular period. It is known as the ‘Top line’ because it is displayed at the top of a company’s income statement and is a figure which is primarily used for highlighting a company’s core business metric. An increasing sales or revenue figure would signify an increase in top-line growth. The company’s expenses or losses are deducted from this gross sales figure to arrive at the profit figure (also referred to as the bottom line).
Why is Top Line important?
The top line is of primary importance for investors and gives an insight into a company’s efficiency and growth. Important points to note wrt Top Line are:
1. It reflects the business of company in the specified period and demand for its products/services
2. The top line growth can be due to increase in prices/volumes, expansion or acquisition
3. Top line growth should be seen on a relative basis which means a comparison with competitors would reveal if it is growing at a better rate than its peers