Glossary
Net Income
What is left of revenue after every expense, interest payment, and tax has been subtracted: the bottom line.
Net income is the last line of the income statement, which is where the nickname comes from. Revenue enters at the top, every category of cost is taken off in turn, and net income is the remainder. Divide it by the share count and you have earnings per share.
It is an accounting figure, which means it involves judgment: when revenue is recognized, how the cost of a long-lived asset is spread across years, what is written down and when. Those judgments are governed by rules and disclosed in the filing, but they are still judgments, which is why cash-based measures are read alongside it.
A single quarter's net income can be moved substantially by one-off events: a legal settlement, a factory sale, a large write-down. Filings separate these out precisely because they say little about how the underlying business ran that quarter.
Related terms
- EPS (Earnings Per Share)A company's profit divided by the number of shares it has, so profit is expressed per slice of ownership.
- Free Cash FlowThe cash a company has left from operations after paying for the equipment and property it needs to keep running.
- Profit MarginThe percentage of revenue that survives as profit once costs are taken out, at whichever stage is being measured.
- RevenueAll the money a company brought in from selling its products and services, before any costs are subtracted.
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