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).
