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Net Income (NI)

Updated: Apr 26

Net income (NI), also called net earnings, is calculated as sales minus cost of goods sold, selling, general and administrative expenses, operating expenses, depreciation, interest, taxes, and other expenses. It is a useful number for investors to assess how much revenue exceeds the expenses of an organization. This number appears on a company's income statement and is also an indicator of a company's profitability.


Businesses use net income to calculate their earnings per share. Business analysts often refer to net income as the bottom line since it is at the bottom of the income statement.


Calculating Net Income for Businesses

To calculate net income for a business, start with a company's total revenue. From this figure, subtract the business's expenses and operating costs to calculate the business's earnings before tax. Deduct tax from this amount to find the NI.


Net income, like other accounting measures, is susceptible to manipulation through such things as aggressive revenue recognition or hiding expenses. When basing an investment decision on NI, investors should review the quality of the numbers used to arrive at the taxable income and NI to ensure that they are accurate and not misleading.


Source: Investopedia, Net Income (NI) Definition: Uses, and How to Calculate It, Examples, accessed 25 December 2023, <https://www.investopedia.com/terms/n/netincome.asp>

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