A-Z Popular Blog Top Search »
Investing
 Advertisements
Related Comparisons
Investing
top   »  economics   »  investment   »  top line vs bottom line

Growth: Top Line vs Bottom Line

 , updated on
Top-line growth is an increase in a firm's revenue or sales.
Bottom-line growth is an increase in a firm's profitability defined as revenue minus all costs. The bottom-line tends to be the more important indicator because it represents earnings that may benefit shareholders.
It is common for startup companies to experience an exponential rate of top line growth for a number of years. It can be difficult to determine whether this will ever translate into bottom line growth. To put it directly, anyone can generate revenue by spending a lot of money. The true test of a firm is whether they can scale their business in a way that makes revenue increasingly profitable.
Consider a firm that grows revenue at 100% and grows costs at 150%. In this situation, the firm is losing money as it grows. Equity analysts will dive into the companies expenses to determine if they are likely to scale. A firm that is developing valuable products or assets such as software may eventually scale. A firm that is just hiring more and more salespeople at a loss to boost revenue isn't necessarily able to scale.
Top Line vs Bottom Line
Top-Line Growth
Bottom-Line Growth
Definition
Sales growth before expenses.
Growth in earnings defined as revenue less all costs including interest, taxes, amortization and stock based compensation.

Investing

This is the complete list of articles we have written about investing.
Animal Spirits
Arbitrage
Behavioral Finance
Business Cycle
Business Risks
Calculated Risk
Capital Flight
Capitulation
Channel Check
Cost Of Capital
Creative Destruction
Defensive Pessimism
Do Nothing Strategy
Financial Analysis
Greater Fool Theory
Home Bias
Investing Risk
Invisible Hand
Liquidity Risk
Model Risk
Moment Of Risk
Mr Market
Noise Traders
Risk Of Ruin
Rule Of Three
Uneconomic Growth
Value Trap
More ...
If you enjoyed this page, please consider bookmarking Simplicable.
 
Cite »

Alpha vs Beta

The difference between two common investment measurements.

Regression Toward The Mean

An overview of Regression Toward The Mean.

Efficient Market Hypothesis

An overview of the Efficient Market Hypothesis.

Animal Spirits

An overview of animal spirits, a theory of investing.

Financial Markets

A definition of financial market with examples.

Mr Market

A definition of Mr. Market, an investing theory.

Organic Growth

A definition of organic growth with examples.

Concept Company

The common types of concept company.

Information Costs

A definition of information costs with examples.

Channel Check

The definition of channel check with examples.

Business Models

A list of common business models.

Bricks And Clicks

A retailing strategy that combines physical locations with a strong ecommerce presence.

Complementary Goods

A definition of complementary goods with several examples.

Collective Business System

An organization that represents businesses or professionals that have something in common.

Product vs Service

The business difference between products and services.

Business Model Examples

A few examples of common business models.

Business Model Definition

The definition of business model.

Scalable Business Model

A definition of scalable business model with several examples.

Two-sided Market

A definition of two-sided market with examples.

Trending

The most popular articles on Simplicable in the past day.

New Articles

Recent posts or updates on Simplicable.
Site Map
Business
Business Analysis
Business Models
Capital
Competition
Consumer Behavior
Economic Conditions
Economic Systems
Economics
Entrepreneurship
Finance
Financial Analysis
Goods
Government
Industries
Infrastructure
Innovation
Marketing
Marketing Economics
Markets
Microeconomics
Pricing
Productivity
More ...
© 2010-2023 Simplicable. All Rights Reserved. Reproduction of materials found on this site, in any form, without explicit permission is prohibited.

View credits & copyrights or citation information for this page.

Home About     Privacy Policy     Cookies Terms of Use     Contact Us Search


Cookies help us deliver our services. You have choices regarding these cookies. Please visit our privacy policy, cookie policy and consent tool to learn more.


Copyright 2002-2024 Simplicable. All rights reserved. This material may not be published, broadcast, rewritten, redistributed or translated. Report violations here.