Bottom line definition
/What is the Bottom Line in Accounting?
The bottom line is the profit or loss reported by a business. This information is located on the lowest line of the income statement, which is the "bottom line" on the report. Someone reading a company's income statement may skip straight to the bottom line to discern the results of the organization, before going back through the details of the income statement to see what caused the profit or loss.
How to Calculate the Bottom Line
To calculate the bottom line, subtract all expenses from revenues. In more detail, the bottom line calculation is as follows:
(Gross revenues - Sales returns and allowances) - (Cost of goods sold + Operating expenses + Taxes) = Bottom line
How to Improve the Bottom Line
The bottom line is improved either by growing revenues or decreasing expenses. Revenue growth is more difficult, since it is, to some extent, outside of the control of the business - customers must decide whether they want to purchase from the firm. It is easier to reduce expenses, since they are under the control of the organization.