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Net Income

Net income, also known as net profit or bottom line, is a financial metric that represents the amount of profit a company has earned after accounting for all expenses, taxes, and other deductions.

Net income is calculated by subtracting all expenses and taxes from a company's total revenue, including cost of goods sold, operating expenses, interest expenses, and income taxes.

The formula for calculating net income is:

Net Income = Total Revenue - Total Expenses - Taxes

A positive net income indicates that a company is profitable and has generated more revenue than it has spent on expenses and taxes. Conversely, a negative net income indicates that a company has incurred losses and has spent more on expenses and taxes than it has generated in revenue.

Net income is reported on a company's income statement, along with other financial metrics such as revenue, operating income, and earnings per share. It is also used to calculate other financial ratios, such as the price-to-earnings (P/E) ratio and the return on equity (ROE).


Company ABC generates $1 million in total revenue from selling products, and incurs $600,000 in operating expenses such as salaries, rent, and utilities. The company also has $50,000 in interest expenses and $75,000 in income taxes. The company's net income can be calculated as follows:

Net Income = Total Revenue - Total Expenses - Taxes 

Net Income = $1,000,000 - ($600,000 + $50,000 + $75,000) = $275,000

This means that Company ABC earned $275,000 in profits after accounting for all expenses and taxes.

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