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Net Income

Last updated 23rd Sep 2022
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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 Revenue29,611,000Cost of Revenue15,693,000Gross Profit13,918,000 Operating Expenses Research Development1,570,000Selling General and Administrative6,170,000Non Recurring0Others0Total Operating Expenses7,740,000 Operating Income or Loss6,178,000 Income from Continuing Operations Total Other Income/Expenses Net39,000Earnings Before Interest And Taxes6,217,000Interest Expense186,000Income Before Tax6,031,000Income Tax Expense1,674,000Minority Interest-74,000 Net Income From Continuing Ops4,283,000 Non-recurring Events Discontinued Operations0Extraordinary Items0Effect Of Accounting Changes0Other Items0 Net Income4,283,000

Related Terms

income statement, revenues, expenses

Moneyzine Editor

Moneyzine Editor