Net Income

Net Income - NI

1. A company's total earnings, or profit. Net income is calculated by taking revenues and adjusting for the cost of doing business, depreciation, interest, taxes and other expenses. This number is found on a company's income statement and is an important measure of how profitable the company is over a period of time. The measure is also used to calculate earnings per share.

Often referred to as "the bottom line". In the U.K., net income is known as "profit attributable to shareholders".

2. An individual's income after deductions, credits and taxes are factored into gross income. Deductions and credits are subtracted from gross income to arrive at taxable income, which is used to calculate income tax. Net income is income tax subtracted from taxable income.

Investopedia Commentary

1. Net income is calculated by starting with a company's total revenue. From this the cost of sales, along with any other expenses that the company incurred during the period, is removed to reach earnings before tax. Tax is deducted from this amount to reach the net income number. Net income, like other accounting measures, is susceptible to manipulation through such things as aggressive revenue recognition or by hiding expenses. When basing an investment decision on net income numbers, it is important to review the quality of the numbers that were used to arrive at this value.

2. For example, suppose that your gross income is $50,000 and you have $20,000 in deductions and credits. This leaves you with a taxable income of $30,000. Then, suppose that another $5,000 of income tax is subtracted the remaining $25,000 will be your net income.

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See also: Core Earnings, Cost Of Goods Sold - COGS, Depreciation, Economic Profit, Expense, Gross Income, Income, Net Operating Income, Operating Income, Revenue

Also spelled: NI

net income

Income after all expenses and taxes have been deducted. Net income, the most frequently viewed figure in a firm's financial statements, is used in calculating various profitability and stock performance measures including price-earnings ratio, return on equity, earnings per share, and many others. Compare gross profit. Also called aftertax profit, bottom line, net, net profit, profit.