Net Income Definition
The net income definition is a company’s profit in a given fiscal period. It consists of total revenues earned in the period less total expenses incurred to generate the revenues in the period. When revenues exceed expenses, the company has a net profit. When expenses exceed revenues, the company has a net loss. Report it on a company’s income statement. Net income is an important measure of a company’s profitability and financial performance for the relevant fiscal period. Also, call it net earnings, net profit, or the bottom line.
Net Income Formula
Basically, compute this income by subtracting all relevant costs and expenses from total revenue. Start with total revenue, also known as the top line as it is shown at the top of the income statement. Then subtract the costs of sales, operating expenses, non-operating expenses, and taxes. This gives you NI. It is also known as the bottom line because it is shown at the bottom of the income statement.
NI = Revenues – Cost of Sales – Operating Expenses – Non-Operating Expenses – Taxes
To learn how to price for profit, download our Pricing for Profit Inspection Guide.
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