What does topline mean?

• ‘Topline’, as the word indicates, is the topmost line item on a company’s income statement, which is generally revenue or gross sales. It can also mean the Net sales or Income from Operations or Total Income (in case of a bank), appearing in the Financial statements of the company.

• Below is an extract of Shriram Transport Finance’s Statement of Unaudited Consolidated Financial Results for quarter ended 30^th June 2014:

(in Rs. lakh)

Thus, topline for Shriram Transport for quarter ended 30^th June 2014 stood at Rs. 2,14,959 lakh or Rs. 2,149.6 crore.

• When we hear that a company is ‘growing its top line’ or ‘generating top line growth’, it means that the company’s sales revenues is increasing.

Let’s take an example of an article in The Economic Times, dated 11^th  August  2014 which reads ‘India Inc posts best profit surge in 9 quarters due to firm top line growth, & stable costs’. The headline states that profit of Indian companies increased because of increasing revenues and stable expenses.

• Increase in topline is a positive indicator for a company.

However, top line only indicates how effective a company is generating sales and does not take into consideration the operating efficiencies which could have an impact on the profitability. Thus, topline gives a limited picture of the company’s financial performance.