Definition
The financial accounting term net Income is used to describe a measure of a company's profitability. Net income is a line item appearing on the income statement, and is derived by subtracting expenses from revenues.
Calculation
Net Income = Revenues - Expenses
Explanation
The goal of a company is to produce profits for the owners. Also known as net profits and net earnings, net income is perhaps the most familiar statement of that profitability as it appears on a company's income statement. While the term profit can have different meanings, net income is the money left over after all of the expenses have been removed from revenues.
Investors and analysts monitor net income since this is the money returned to shareholders in the form of a stock dividend or retained earnings.
Example
The table below illustrates the derivation of net income.
| Total Revenue | 29,611,000 |
| Cost of Revenue | 15,693,000 |
| Gross Profit | 13,918,000 |
| Operating Expenses | |
| Research Development | 1,570,000 |
| Selling General and Administrative | 6,170,000 |
| Non Recurring | 0 |
| Others | 0 |
| Total Operating Expenses | 7,740,000 |
| Operating Income or Loss | 6,178,000 |
| Income from Continuing Operations | |
| Total Other Income/Expenses Net | 39,000 |
| Earnings Before Interest And Taxes | 6,217,000 |
| Interest Expense | 186,000 |
| Income Before Tax | 6,031,000 |
| Income Tax Expense | 1,674,000 |
| Minority Interest | -74,000 |
| Net Income From Continuing Ops | 4,283,000 |
| Non-recurring Events | |
| Discontinued Operations | 0 |
| Extraordinary Items | 0 |
| Effect Of Accounting Changes | 0 |
| Other Items | 0 |
| Net Income | 4,283,000 |
Related Terms
income statement, revenues, expenses
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