Bottom Line

If you’re the type that likes to tell long-winded stories, your friends might frequently ask, “Will you get to the bottom line?” Although, uh...there might be a few four-letter words thrown in there for effect.

In the finance world, the bottom line refers to the profit shown at the end of a company’s income statement that subtracts total costs from total revenue. It could be labeled as "net income" or "earnings per share."

If a company is not happy with its bottom line at the end of a month, quarter, or year, it has two choices: reduce costs or increase revenue (or both). Reducing costs could mean the painful experience of having to lay off employees, or trying to lower the cost of raw materials or administrative expenses. (Say good-bye to free coffee.)

As this tactic alone often results in a downward spiral, many decide it’s time to find new markets, introduce new products, sell properties, increase prices, or expand overseas in order to increase revenue. And if a bottom line is positive, the company could use the profit to issue a dividend, buy back stock, invest in new equipment, pay back loans...or bring back the free coffee.