# Top Line

## What it is:

The top line, also called gross sales, usually refers to a company's revenue before subtracting discounts and returns.

## How it works (Example):

Let's assume restaurant chain XYZ had \$1,000,000 in sales for the year. The company's top line is \$1,000,000.

Depending on the context, "top line" may be used to refer to gross sales or net sales. For example, if XYZ offered \$30,000 worth of discounts throughout the year to senior citizens, student groups and people who redeemed a coupon, and also refunded \$5,000 to unhappy customers during that time, XYZ's top line might be:

\$1,000,000 - \$30,000 - \$5,000 = \$965,000

Typically, the company’s income statement would show \$1,000,000 of gross sales, then \$35,000 in coupons and discounts, and then \$965,000 of net sales. Either sales figure could be the "top line," depending on the conversation, so it's important to understand the meaning behind any colloquial usage.

## Why it Matters:

The top line generally does not account for the cost of goods sold, general and administrative expenses, or other costs (those are typically incorporated in the operating income calculation).

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