Net income

Definition

Net income is the total profit a company makes after deducting all expenses, taxes, and costs from its total revenue. It is often referred to as the bottom line or net profit.

5 Must Know Facts For Your Next Test

1. Net income is found on the income statement and indicates a company's profitability.
2. It is calculated by subtracting total expenses from total revenues.
3. Net income can be affected by non-operating items such as interest and taxes.
4. A positive net income signifies that a company is profitable, whereas a negative net income indicates a loss.
5. Net income plays a crucial role in determining retained earnings on the Statement of Owner’s Equity.

Review Questions

Related terms

Gross Profit:

Total revenue minus the cost of goods sold (COGS), not accounting for other expenses.

Operating Income:

Income generated from regular business operations, calculated as gross profit minus operating expenses.

Retained Earnings:

The portion of net income that is retained by the company rather than distributed to shareholders as dividends.