Bottom Line

A term for a company’s net income, or actions that may impact its overall profitability. A company streamlining operations may be said to be “trying to improve its bottom line”.

Most companies attempt to improve their bottom line either by increasing revenues or cutting costs. Usually, rapidly increasing revenues lead to promises by management and expectations from analysts of an increased bottom line though this may not actually occur if costs spin out of control.  Over-cutting costs may lead to a decline in the competitiveness of the business.

Wall Street usually pays close attention to the earnings of a company each quarter. Such a myopic view does not take the long term prospects of a company into sight. An investor should focus more on the long term prospects of a company rather than pay too much attention to the bottom line of a company each quarter.

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