Frequently Asked Questions About the Bottom Line

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What is included in the bottom line?

A companys bottom line includes any of the expenses a business needs to operate. These may include the following items:

What is the bottom line?

The bottom line is a businesss profitability after it deducts all of its expenses from its revenues. Its essentially the money that is left over after you subtract everything the business has spent for a certain period of time. Companies have a wide variety of practices they use to increase their bottom line. If a company were to spend too much on production and labor, they may end up with a negative bottom line. The goal is to have a positive bottom line and to find ways to steadily increase it over time.

How do businesses improve the bottom line?

Businesses can use the following strategies to improve their bottom line:

Lower expenses

One way companies improve their bottom line is by cutting costs. Finding cheaper materials, cutting positions and creating more efficient operating systems are all ways to lower costs. By keeping business expenses low, there will be more money left over.

Increase prices

Another way companies can improve their bottom line is by increasing the prices of their products and services. The key is to make sure they are still offering a fair value on their offerings to keep sales steady. This strategy requires an understanding of market demand and what the consumer is willing to pay for a good or service.

Refinance

Paying high interest on business loans can majorly cut into a businesss bottom line. Throughout the life of a business, an owner may be able to meet with their bank to see if they can refinance their loans and get a better interest rate. Established business owners with good credit may have a better chance at refinancing loans in their favor.

Define the target audience

While increasing your prices can improve your bottom line, so can making more sales. One way to do this is by defining your target audience. These are the group of consumers you want to direct your marketing messaging to. Using the following strategies can help you define your target audience:

Hire better candidates

Having quality employees is a major part of increasing company profits. With the right team of talent, employees can drive up sales and brand reputation. Finding employees who value the mission of the brand is important. By building a positive company culture and work environment, employers can create more loyal employees who choose to stay with the company.

How do companies calculate the bottom line?

Companies choose to calculate their bottom line periodically, perhaps every quarter. To find your bottom line, you need to subtract all of your business expenses from your revenue during a specific period of time. Here is the formula you can use:

How do companies use the bottom line?

Companies use their bottom line to gauge their financial health. If the bottom line is negative, then some major changes may need to happen. Likewise, if the bottom line isnt increasing enough, a business may choose to either cut costs or increase revenues.

The bottom line is also important for stock purposes. Companies can use it to issue payments, also called dividends, to stockholders. You can also use the bottom line to buy stock again or to retire equity.

What are some other important financial terms?

Along with getting to know about the bottom line, get to know these other relevant financial terms:

Top line

These are the gross figures a company reports, typically at the top of an income statement. It includes the companys revenue and sales. This number indicates whether a company is selling more goods and services from one period of time to the next.

Profit and loss statement (P&L)

This financial document gives an overview of a companys costs, revenues and other expenses during a set period of time. Companies typically release their P&L statement on a quarterly or annual basis. This statement is required for all public companies to release, as it gives you an idea of a companys financial stability.

Gross margin

To calculate this figure, companies subtract their cost of goods sold (COGS) from their net sales. This number tells you how profitable a company is after it accounts for its production expenses.

Net profit margin

Companies use the net profit margin to turn their new income or profit into a percentage of revenue. It expresses the ratio of net profits to revenues. Essentially, this percentage tells a company what portion of each revenue dollar they earned turns into profit. The key difference between a net profit margin and a gross margin is that the former subtracts the COGS along with any other operating or business expenses.

Return on sales (ROS)

Companies use this ratio to evaluate their revenue performance. You can calculate it by dividing a companys profits by its expenses.

FAQ

What does bottom line do?

The bottom line shows how profitable a business is and how well it controls expenses. The top line, also found on the income statement, is a component of net income. It refers to the gross revenues generated by a business within a certain period.

What is bottom line organization?

Bottom Line is a national education organization that is addressing the degree divide by providing individualized academic, personal, financial, and career counseling to empower first-generation students from low-income backgrounds to enroll in and succeed through college.

Who are Bottomline competitors?

Bottomline Technologies competitors include Workiva, ACI Worldwide, PayStand, Hyland and EVO Payments International. Bottomline Technologies ranks 1st in Product Quality Score on Comparably vs its competitors.

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