Income is the total income received from the sale of goods or services, related to the main activity.
- The company is often called the top line because he is sitting at the top of the income statement.
- The upper line refers to the income of the enterprise or gross sales. The amount of revenues the company generates, before any expenses are taken out. Therefore, when the company “top-line growth,” the company observed an increase in gross sales or revenues.
Income or net profit is the total profit and revenue. When investors and analysts talk about earnings, they actually indicate the net income or profit for the company.
- Net income is calculated from income and subtracting the expenses of doing business such as depreciation, interest, taxes, and other expenses.
- Net profit is shown in the statement of profit and loss of the company and is an important indicator of the profitability of the company.
- Since the company is the top line; the net profit on the bottom line or the “bottom” figure on the income of the company.
- More specifically, the essence of the company’s income after all expenses have been deducted from revenues. These costs include interest paid on loans, General and administrative expenses, taxes and operating expenses, such as rent, utilities, wages. The bottom line of the company also called net profit.
- There may be additional sources of income that add to the income that may include interest accrued on the investments or the proceeds from the sale of physical or intangible assets, such as equipment or bonds.
Example – Apple.
Apple. (Shares aapl) posted the top online company in the amount of $228.57 billion at the end of the accounting year to 30 September 2017. The amount of revenue represented 6.7% of top-line growth from the same period a year earlier.
Apple posted $48.35 billion in net profit in the same period 5.8% increase in profit in 2016.
We see that Apple’s net profit is less than their total income with net profit is the result of total income minus all expenses of the company of Apple for the period. The above example shows how different income revenue, citing the company’s financial performance.
Of net profit growth and revenue growth can be achieved in various ways. A company like Apple could increase revenues through new product launch as a new iPhone, a new service or a new advertising campaign that will increase sales, which increased sales volume by 6.7% year-on-year. Bottom line growth can occur from increased revenues, but also to cut costs or find cheaper suppliers.
Income is often regarded as synonymous with sales, as both terms denote a positive cash flow. However, in the financial context the term income almost always refers to the essence or net income because it reflects the total amount of income remaining after all expenses and additional income.
Both revenue and net income are useful in determining the financial stability of the enterprise, but they are not interchangeable. The bottom line or net income describes how effectively the company works with its costs and optimize operating costs. The company, or topline, on the other hand, shows only how effectively the enterprise to increase sales and revenue and does not take into account efficiency, which can have a huge impact on the bottom line.
For more information about revenue and net profit and how to interpret the results, please read what is the difference between bottom line and top line growth?