Bottom line

In the financial world, the bottom line is also known as the net income, net earnings, profit, or earnings per share. The root of the term is actually due to the position of figure reflecting the net income of a company in the income statement: it is usually the last line at the bottom of the last page.

How is the bottom line calculated?

The bottom line is determined by taking note of the total revenue of the company, then deducting all expenses and costs from this figure. What is left is the bottom line, or the profit of the company.

The items deducted from the total revenue of the company will vary depending on the nature of the business, but there are some commonalities. Examples of these would be taxes, operating expenses, cost of goods or service sold, sales discounts, and even the preferred stock dividends.

The same principle is applicable to an individual’s personal finances. His bottom line would be all his earnings for a fiscal year minus all his expenses. These personal expenses can include taxes and other costs associated with daily life.

Depending on the revenue and expenses, the bottom line can be negative or positive.

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