Net Income

Last updated 25th Apr 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 Revenue29,611,000
Cost of Revenue15,693,000
Gross Profit13,918,000
Operating Expenses
Research Development1,570,000
Selling General and Administrative6,170,000
Non Recurring0
Others0
Total Operating Expenses7,740,000
Operating Income or Loss6,178,000
Income from Continuing Operations
Total Other Income/Expenses Net39,000
Earnings Before Interest And Taxes6,217,000
Interest Expense186,000
Income Before Tax6,031,000
Income Tax Expense1,674,000
Minority Interest-74,000
Net Income From Continuing Ops4,283,000
Non-recurring Events
Discontinued Operations0
Extraordinary Items0
Effect Of Accounting Changes0
Other Items0
Net Income4,283,000

Related Terms

income statement, revenues, expenses

Moneyzine Editor

Moneyzine Editor