Glossary
Net income
Revenue minus all expenses, interest and taxes for a period; the bottom line of the income statement.
On this page
Net income is what a company has left from its revenue after paying every expense for the period: the cost of goods, operating costs, interest, taxes and any one-time charges or gains. It is the bottom line of the income statement, the figure behind earnings per share and the price-to-earnings ratio, and the profit that belongs to shareholders. When the result is negative it is a net loss.
How it is built up
What to watch for
Net income follows accrual accounting, so it records revenue when earned and costs when incurred, not when cash moves. A company can report strong net income while burning cash, for instance if customers are slow to pay, or report a loss while generating cash, if large non-cash charges such as depreciation or write-downs are included. Comparing net income with operating cash flow is a basic quality check.
One-off items can distort a single year: a gain from selling a division lifts net income without any improvement in the business. For companies with minority owners in subsidiaries, look for net income attributable to the parent company's shareholders, the line that earnings per share is based on.