Bottom line

See also: Result

The bottom line of a Undertaken over a given period (for example: one year) is equal to:

  • the sum of the products carried out by this one over the period,
  • which one deduced the unit from the loads (of exploitation, financial and exceptional) committed over the same period, as well as the Corporation tax.

The bottom line can thus take the form of a loss (negative bottom line) or of a Bénéfice (positive bottom line).

Use in financial analysis

The bottom line was a long time (until the beginning of the year 1980) the indicator-key of measurement of the performance of a Entreprise. Currently, the bottom line as far as does not play any more one paramount role the performance of a company owing to the fact that it includes the whole of the loads supported by the company. It is thus not a reliable indicator of comparison.

To illustrate this point, one considers a company which loses much money in its core activity (see the articles on the Turnover or the Operating margin); this company can have a positive bottom line if, during the year, it resold part of its machines (cf the article on the exceptional produced ) for an amount which compensates for its trading losses.

The bottom line, a base of calculation

Now, the bottom line is used to calculate, inter alia:

  • the Capacity of self-financing (CIF) of the Undertaken;
  • the Earning per share (BPA or BNPA) which offer actions of the company (if this one is with dimensions on the financial markets) and, therefore, the ratio PER (course divided by BNPA).
  • the Dividend. The companies decide sometimes policy of distribution which corresponds to the percentage of the benefit (Net or Net running) which will be redistributed in the form of dividend with the Actionnaire S of the company.

In order to have a more critical opinion on the health of a company, it is advisable to study in a more precise way the intermediate Soldes of management from which the bottom line rises.

See too

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