Question

Bottom line refers to which line on the income statement?

• A. Operating income

• B. Retained earnings

• C. Net income, net profit, or net earnings

• D. Net worth

Answer 1

Answers is C. Net income, net profit, or net earnings

Meaning of bottom line of income statement is the figure presented in at the bottom of the income statement i.e net profit or net earnings. This is the earning available to owners after deducting all expenses (direct and indirect expenses).

Justification of answer

· A. Operating income: operating is the income derived after deduction direct expenses only i.e. cost of goods sold and direct wages. it is not ending of income statement.

· B. Retained earnings: it is the accumulated profits of previous years kept in the business, it is not part of current income statement rather it is liability item in the balance sheet

· C. Net income, net profit, or net earnings: it is the final figure of income statement after charging all expenses, hence it is called as bottom line of income statement. it is the correct answer.

· D. Net worth: it is difference between assets minus liability of the company. it depicts the financial position of firm. It is derived from balance sheet figures hence it is not related to income statement.

The correct answer is option C Net income, net profit, or net earnings, which available to owners without any further charges.