Net Income

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