What It Is:

The term "bottom line" refers to the net income figure that is typically expressed on the last line of a company's income statement.

How It Works/Example:

A company's income statement comprises three major components: The total revenue listed at the top (also called the top line), a list of itemized expenses and the net income listed at the bottom. Net income is the difference between the total revenue line and the sum of all itemized expenses.

To illustrate, suppose a company makes $10,000 in total revenue (top of the statement) and had a total of $8,000 in expenses (middle of the statement). The company's net income would then be $2,000 (bottom of the statement).

Why It Matters:

The bottom line is no more and no less than the income a company generates from business operations above and beyond its expenses. When a company examines ways it can reduce its expenses and or generate higher revenues, it is said to be improving its bottom line thereby increasing its profitability.