DEFINITION of Bottom line
The term bottom line can mean net earnings, net income, or earnings per share.
In business, it is the amount of money which remains after you pay all expenses. You need to know your company’s bottom line to figure out if your business is profiting or losing money.
WHAT IT IS IN ESSENCE
For companies, it is an important factor in share trading. It can be used to refer to the net earnings or earnings per share (EPS) of a business.
It represents the entire profit which comes as an income statement, minus all losses including the cost of goods, tax and interest payments on debts. If we are speaking about EPS, the figure is divided by the number of outstanding shares in the company. It comes from the position of net income in a company’s earnings report: at the bottom. In this regard, it stands in contrast to the top line, or the revenue figures for a business.
There are two main ways in which a business will attempt to improve its bottom line. Firstly it will increase profits, and secondly, it will decrease costs.
HOW TO USE
Sometimes, it is lower than you want it to be. The expenses might be cut back as far as they can go. And the company might be selling a lot of products.
What company can do if a customer won’t pay you? Not receiving payments on time or at all from customers can really decrease it So, the company can increase its chances of receiving payments by establishing a clear late payment policy. It can do that by imposing late fees on its customers. Or can even offer a discount for customers who pay early.
The bottom line in business tells the amount of money the business has left after accounting for expenses. Compare it each month to experiment with how to improve it.
Note there are differences each month to observe what helps and doesn’t help increase it. It is impossible to know exactly what determines the company’s bottom line since the market changes constantly.