Top line definition
/What is the Top Line?
Top line refers to the revenue line item in the income statement. The name comes from the positioning of revenue in the first or “top” line of the income statement. Organizations sometimes refer to actions taken to increase their revenues as “top line” growth. By comparison, the bottom line refers to the net profits generated by a business; the name is derived from the positioning of the net profit line at the bottom of the income statement.
Importance of the Top Line
Analysts focus a great deal of their attention on the top line figure reported by a business, because this is a strong indicator of performance. As long as revenues continue to increase at a rate faster than the rate of inflation, they assume that a firm is financially healthy. However, a declining top line indicates a loss of market share, and therefore a likely decline in profitability. This is a particular concern when the top line continues to decline over time.