Dictionary / Financial statements
What Is Net Income?
Net income is the final profit after every cost, interest payment and tax is paid. It is the true bottom line of the income statement.
How to calculate net income
Revenue−All costs, interest and taxes=Net income
A company sells $1 million, pays $800,000 in costs, $20,000 in interest and $45,000 in taxes. Its net income is $135,000.
Net income vs revenue
Revenue is all money in. Net income is what remains. A company can have huge revenue and negative net income, called a net loss.
Why investors care
Net income divided by the number of shares is EPS, which drives the P/E ratio. Net income can be hit by one-time items, so look at several years.
See it in real companies
Open a company to see what it sells and how it makes money.
Related terms
Income statementShows revenue, costs and profit.
Operating incomeProfit from the core business.
Gross profitSales minus the direct cost of the product.
EPSThe profit one share earned.
Profit marginHow many cents of profit from each dollar of sales.
Revenue vs profitMoney coming in versus money left over.