What is “Net Income” meaning?

Net income, also known as the bottom line or profit, represents a company’s total earnings after all expenses, taxes, and costs have been deducted from its total revenue. It is a key indicator of a company's financial health and profitability. Net income is often used by investors to assess a company’s overall performance and potential for growth.

Example

“After accounting for all expenses and taxes, the company’s net income for the quarter was $2 million, surpassing analysts’ expectations.”

How is “Net Income” used in business?

Net income is used by investors, analysts, and executives to evaluate the profitability of a business. It’s a crucial metric for financial statements and often influences decisions related to investments, dividends, and corporate strategy. Net income is also used to calculate important financial ratios like earnings per share (EPS).

Pro Tip

While net income is an essential profitability measure, be mindful that it can be affected by one-time items or accounting adjustments, so always consider it in the context of other financial metrics.

Related Terms

Gross Profit, Operating Income, Earnings Per Share (EPS), Profit Margin