The term ‘bottom line’ can mean net earnings, net income or earnings per share. The net income figure appears at the bottom of a company’s income statement, hence the expression.
A commercial enterprise’s bottom line is the total profit made on the income statement, minus all the losses incurred, including the cost of goods, interest payments on debts, and tax. When referring to earnings per share (EPS), the figure is divided by the number of outstanding shares in the firm.
Companies try to improve their bottom lines in two main ways: 1. By increasing profits by generating more sales. 2. By reducing costs. 3. By improving productivity – production per hour per worker.
Bottom line means net earnings (net profit) because it appears at the bottom of a company’s financial statement.
In financial jargon, Bottom Line is the opposite of Top Line when discussing the financial performance of a company.
While one, as mentioned above, refers to the net income or net earnings of a commercial enterprise, the ‘top line’ refers to the gross sales or revenues it generates.
Gross sales or revenues appear at the top of the Profit & Loss Statement or Income Statement.
“Bottom Line as a financial performance measure, describes how efficient an enterprise has been in controlling its costs. Top line, on the other hand, as a financial performance measure, only reports on how effective an enterprise has been in generating sales/revenues.
In the image, the speaker means that the price of oil has hurt the airline’s profits.
Other meanings of ‘bottom line’
Final Outcome: the term may also refer to the conclusion – final outcome – of something, as in “The bottom line is that she will have to sell her house – legally there is nothing she can do to prevent its sale.”
Money Owed: When you want to cut through the chase and find out how much is owed, you can say “So, what’s the bottom line, just give it to me – how much do I owe?”
Minimum Amount Accepted: If you go for a job interview, your bottom line is the lowest salary you would accept. You might say “This job is very interesting, but it is below my bottom line,” – this means that it pays less than the minimum you could accept; it does not pay enough.
The Most Important Fact: as in the phrase “The bottom line is that without the extra $1 million, the project will never get off the ground.”