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Net income
From Wikipedia, the free encyclopedia
Net income is equal to the income that a firm has after subtracting costs and expenses from the total revenue. Net income can be distributed among holders of common stock as a dividend or held by the firm as retained earnings. Net income is primarily an accounting term used in the US; in other countries (such as the UK) profit is the usual term[citation needed]. Additionally, in the US net income is often (though ambiguously) called just income.
The items deducted will typically include tax expense, financing expense (interest expense), and minority interest. Likewise, preferred stock dividends will be subtracted too, though they are not an expense. For a merchandising company, subtracted costs may be the cost of goods sold, sales discounts, and sales returns and allowances. For a product company advertising, manufacturing, and design and development costs are included.
Net income is informally called the bottom line because it is typically found on the last line of a company's income statement. (A related term is top line, meaning revenue, which forms the first line of the account statement.)
An equation for net income in merchandising:
Net income or Net loss = Revenue – Cost of goods sold – Sales discounts – Sales returns and allowances – Expenses – Minority interest – Preferred stock dividends
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