What it means
The horizontal axis normally shows time, such as days, months or quarters, and the vertical axis shows the amount being measured. Each point is one observation, and the line connecting the points makes the direction and pace of change easy to see at a glance.
Finance and management reports use line charts because the eye picks up trends faster than it can read a table of numbers. A chart of monthly sales over three years shows growth, seasonality and sudden drops in a way that a spreadsheet cannot.
Several lines on one chart let readers compare products, regions or actual results against budget. Good charts are honest about scale.
If the vertical axis starts at a number well above zero, a small change can look like a dramatic one, so readers should check the axis labels before reacting. Using too many lines, or lines in similar colours, makes a chart hard to read and defeats its purpose.
A line chart suits continuous or ordered data, where it makes sense to join one point to the next. It is a poor choice for unrelated categories, such as sales by product type, where a bar chart is clearer because the lines would imply a connection that does not exist.
Variants include the multi-line chart for comparisons, the stacked line chart for showing parts of a total, and the line chart with a target line to show goals. In dashboards, small line charts called sparklines sit beside a figure to show its recent trend without taking much space.
Many teams also add a moving average line, which smooths out short-term noise so the underlying direction is easier to judge.
In practice
Real-world examples.
Example
A finance manager plots monthly cash balances for twelve months and spots that the line dips every March when annual insurance premiums are paid. She arranges a short-term facility to cover the dip before it happens. The following year the line stays above the minimum balance throughout, and no emergency borrowing is needed.
Example
A marketing director charts weekly website sign-ups against ad spend on the same grid. The two lines move together for ten weeks and then split, which prompts a review of whether the campaign has run out of audience.
Example
A retailer plots daily stock levels for a seasonal product over three years. The pattern repeats every winter, which helps the buyer place orders earlier and avoid shortages. The same chart also shows that unsold stock in January has been shrinking, which suggests the discounts are working.
Formula
Calculation
Percentage change between two points = (later value - earlier value) / earlier value x 100.
Suppose a line chart shows quarterly revenue of $400,000 in the first quarter and $460,000 in the second. Change = 460,000 - 400,000 = $60,000. Percentage change = 60,000 / 400,000 x 100 = 15%. The line between the two points therefore rises by 15%, and a steeper line in the next quarter would signal faster growth.Case study
Seen in the real world.
Brightwater Foods is an illustrative, fictional manufacturer whose management team reviewed a table of 36 months of sales each quarter without noticing anything unusual. When the finance analyst plotted the same numbers as a line chart, a pattern appeared at once: sales had been climbing steadily for two years and then flattened for the last eight months.
The flattening coincided with a change in packaging, and the team realised the new design had lost shelf visibility in some stores. They reversed the change in the affected regions and watched the line turn upward again over the following quarters.
In this illustrative case the chart did not contain any information the table lacked. It simply made the story visible fast enough for the team to act while the problem was still small. The finance team now includes a line chart on the first page of every monthly sales pack.
Watch out
Common mistakes.
- Starting the vertical axis well above zero, which exaggerates small movements and can mislead readers about how big a change really is.
- Crowding a chart with too many lines, so that readers cannot tell which line is which.
- Using a line chart for unrelated categories, where joining the points suggests a trend that does not exist.
Questions
People also ask.
When should I use a line chart instead of a bar chart?
Use a line when you want to show change over a continuous or ordered scale such as time, and a bar chart when you are comparing separate categories.
How many data points do I need?
At least three or four so that a trend is visible, though dozens of points are common for time series such as monthly or daily data.
Can a line chart show forecasts?
Yes, forecast values are often drawn as a dashed line or a differently coloured line that continues from the last actual figure.
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