Net income is the total earnings (or profit) of a company. Net income is calculated by taking revenue and subtracting operating expenses, such as depreciation, interest, taxes, and other expenses. The result of the profit is shown on a company’s income statement and is an important measure of how profitable a company is over a given period of time.
Companies use net income to calculate their earnings per share (EPS).
To calculate a company’s net income, you need to know its total revenue.
From this, you subtract business expenses and operating costs to calculate the profit before taxes. Subtracting the tax rate again gives the net income of the business.
Net income, like other accounting metrics, can be subject to manipulation such as overstating revenue or hiding expenses.
