Top line is a number that represents a company’s gross revenue or sales from products or services; this figure is so-named because it appears at the top of an income statement. The United States Securities and Exchange Commission (SEC) compares an income statement to a staircase with total revenue during a specific accounting period at the top, the steps below that show deductions for various costs or other operating expenses associated with earning the revenue, and the final step as the bottom line, or net income, after all the deductions are made.
Top-line growth, which refers to an increase in gross revenue or sales, shows how effective a company is at generating sales. However, the top line does not take into account operating efficiencies and costs that affect a company’s bottom line, or net profits, which appears on the bottom line of an income statement. Yet, it is possible for a company to experience top-line and bottom-line growth simultaneously if it keeps its operating costs in check. A company may report top-line growth but not bottom-line increases, or vice versa, in a given period, however the top and bottom lines -- as well as the numbers in between -- are crucial in determining a company’s financial health.
According to the American Management Association (AMA), revenue growth that is based on "customer benefit" is more likely to improve top line growth. The association defines customer benefit as the advantage customers gain from their experience of selecting and using a particular product or service. This is because when a product offers customers value, they are willing to pay more and play a bigger role in making the product profitable. They are also more willing to promote the product through word of mouth and social media marketing channels, which can help lower advertising costs.