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What is Net Income?
What is Net Income?
Published: 2016/02/17
Channel: Phil Town's Rule #1 Investing
Accounting for Beginners #37 / Net Income / Income Statement / Balance Sheet / Accounting Basic
Accounting for Beginners #37 / Net Income / Income Statement / Balance Sheet / Accounting Basic
Published: 2017/07/03
Channel: CPA Strength
How to Determine Net Income or Loss (Accounting Principles)
How to Determine Net Income or Loss (Accounting Principles)
Published: 2014/12/16
Channel: Matthew Origoni
Lesson 6   Net Income
Lesson 6 Net Income
Published: 2015/12/02
Channel: factswithfowler
Online income Bangla Tutorial- 3 misconception of Earning money online in Bangladesh VS Real income
Online income Bangla Tutorial- 3 misconception of Earning money online in Bangladesh VS Real income
Published: 2016/07/14
Channel: WaliBD Bangla
Accounting Equation; Retained Earnings; Net Income; Dividends - video
Accounting Equation; Retained Earnings; Net Income; Dividends - video
Published: 2010/12/16
Channel: Brian Routh TheAccountingDr
Income Statement, Cont
Income Statement, Cont'd: EBITDA, Net Income
Published: 2013/06/09
Channel: Alex Glassey
What is the Difference Between Gross Income and Net Income?
What is the Difference Between Gross Income and Net Income?
Published: 2012/06/21
Channel: Damon Duncan
3 BEST WAYS TO EARN MONEY ONLINE UPDATE 2017 [Bangla Tutorial]
3 BEST WAYS TO EARN MONEY ONLINE UPDATE 2017 [Bangla Tutorial]
Published: 2017/09/22
Channel: TecH Bangla Pro
EBIT vs. EBITDA vs. Net Income: Valuation Metrics and Multiples
EBIT vs. EBITDA vs. Net Income: Valuation Metrics and Multiples
Published: 2014/01/23
Channel: Mergers & Inquisitions / Breaking Into Wall Street
Introduction to the income statement | Stocks and bonds | Finance & Capital Markets | Khan Academy
Introduction to the income statement | Stocks and bonds | Finance & Capital Markets | Khan Academy
Published: 2009/08/19
Channel: Khan Academy
Net Income
Net Income
Published: 2010/12/22
Channel: Quatere
Mushroom Farming- Earning Monthly 1 Lakh Net Income | Sri Lakshmi |
Mushroom Farming- Earning Monthly 1 Lakh Net Income | Sri Lakshmi |
Published: 2018/08/03
Channel: Rythunestham
Is Net Income The Same As Profit?
Is Net Income The Same As Profit?
Published: 2016/09/10
Channel: AllIn
What is NET INCOME? What does NET INCOME mean? NET INCOME meaning, definition & explanation
What is NET INCOME? What does NET INCOME mean? NET INCOME meaning, definition & explanation
Published: 2016/08/10
Channel: The Audiopedia
Financial Modelling - Basic Income Statement - Operating Expense and Net Income
Financial Modelling - Basic Income Statement - Operating Expense and Net Income
Published: 2013/09/25
Channel: BusinessFinance
Virat kohli Net worth, Restaurant, Income, House, Car, Family, Investment, & Luxurious Lifestyle
Virat kohli Net worth, Restaurant, Income, House, Car, Family, Investment, & Luxurious Lifestyle
Published: 2017/10/07
Channel: BKM NEWS
Net vs. Gross (Income, Pay/Salary, etc.) in One Minute: Definition/Difference, Explanation, Examples
Net vs. Gross (Income, Pay/Salary, etc.) in One Minute: Definition/Difference, Explanation, Examples
Published: 2018/07/02
Channel: One Minute Economics
Net Income Approach
Net Income Approach
Published: 2017/05/05
Channel: Shashi Aggarwal
LIFO And FIFO Inventory Accounting (Comparing Net Income & Ending Cash Balance)
LIFO And FIFO Inventory Accounting (Comparing Net Income & Ending Cash Balance)
Published: 2012/11/13
Channel: Allen Mursau
#Percentage | INCOME TAX and NET INCOME | Nehra Sir
#Percentage | INCOME TAX and NET INCOME | Nehra Sir
Published: 2018/08/27
Channel: Easy Maths with NEHRA SIR
Income Statement Merchandising Operations (Net Sales, Gross Profit, Net Income)
Income Statement Merchandising Operations (Net Sales, Gross Profit, Net Income)
Published: 2012/09/08
Channel: Allen Mursau
How to Determine Net Income or Loss Accounting Accounting Principles
How to Determine Net Income or Loss Accounting Accounting Principles
Published: 2014/12/15
Channel: Wiley
Distributable Net Income (DNI) vs Taxable Income For Estates and Trusts
Distributable Net Income (DNI) vs Taxable Income For Estates and Trusts
Published: 2015/11/11
Channel: Rob Pederson
Net Income on the Cash Flow Statement
Net Income on the Cash Flow Statement
Published: 2013/01/05
Channel: Perfect Stock Alert
Calculating Net Income
Calculating Net Income
Published: 2012/09/12
Channel: Steve Watkins
Gross and Net Income
Gross and Net Income
Published: 2015/01/06
Channel: colwellmath
Net Operating Income Approach
Net Operating Income Approach
Published: 2014/01/30
Channel: MVN University
Chapter 4 - Net income vs. Cash flow
Chapter 4 - Net income vs. Cash flow
Published: 2015/05/02
Channel: Jaime Lancaster
How the Balance Sheet and Income Statement are Connected
How the Balance Sheet and Income Statement are Connected
Published: 2016/10/02
Channel: Edspira
Gross to Net income
Gross to Net income
Published: 2014/02/19
Channel: Amber Geldien
Income: Gross Income and Net Income
Income: Gross Income and Net Income
Published: 2015/01/24
Channel: Peter Blake
Sandeep Maheshwari Income, House, Cars, Luxurious Lifestyle & Net Worth
Sandeep Maheshwari Income, House, Cars, Luxurious Lifestyle & Net Worth
Published: 2017/06/19
Channel: Top 5
Organic Layer poultry Farm || Monthly 10 lakhs turnover, net income 2 lakhs per month
Organic Layer poultry Farm || Monthly 10 lakhs turnover, net income 2 lakhs per month
Published: 2018/05/24
Channel: Rythunestham
CAPITAL STRUCTURE THEORIES IN HINDI | Net income, Net Operating Income, MM approach | BBA/Bcom | ppt
CAPITAL STRUCTURE THEORIES IN HINDI | Net income, Net Operating Income, MM approach | BBA/Bcom | ppt
Published: 2018/03/25
Channel: Sonu Singh - PPT wale
Neha Pendse (Big Boss 12) Lifestyle,Boyfriend,Cars,Income, Net Worth
Neha Pendse (Big Boss 12) Lifestyle,Boyfriend,Cars,Income, Net Worth
Published: 2018/09/23
Channel: 10 DEGREE INDIAN FACTS
Cristiano Ronaldo Income, House, Cars, Luxurious Lifestyle & Net Worth
Cristiano Ronaldo Income, House, Cars, Luxurious Lifestyle & Net Worth
Published: 2017/07/15
Channel: Top 5
Nick Jonas Lifestyle, Net Worth ,Girlfriend, House, Cars,  Family, Income, Luxurious & Biography
Nick Jonas Lifestyle, Net Worth ,Girlfriend, House, Cars, Family, Income, Luxurious & Biography
Published: 2018/02/10
Channel: Unknown Thing
Uber Driver-Partners: Gross Income vs Net Income - TurboTax Tax Tip Video
Uber Driver-Partners: Gross Income vs Net Income - TurboTax Tax Tip Video
Published: 2018/02/19
Channel: TurboTax
Why Do You Use Net Income to Calculate Return on Assets (ROA)?
Why Do You Use Net Income to Calculate Return on Assets (ROA)?
Published: 2016/08/30
Channel: Mergers & Inquisitions / Breaking Into Wall Street
00033 - How To Calculate Your Net Income Using Microsoft Excel
00033 - How To Calculate Your Net Income Using Microsoft Excel
Published: 2014/10/28
Channel: Microsoft Excel Tutorials
Income tax Basics || RESIDENTIAL STATUS with MCQs | Commerce | in Hindi | CBSE UGC NET
Income tax Basics || RESIDENTIAL STATUS with MCQs | Commerce | in Hindi | CBSE UGC NET
Published: 2018/04/24
Channel: Nav classes
Finding The Total Expenses, Total Revenue And Net Income (Loss) In Excel
Finding The Total Expenses, Total Revenue And Net Income (Loss) In Excel
Published: 2010/10/01
Channel: NorhananMangadang
Net income approach
Net income approach
Published: 2014/01/29
Channel: MVN University
Ashish Chanchlani Net Worth, Income, House, Car, Love Affairs and Luxurious Lifestyle
Ashish Chanchlani Net Worth, Income, House, Car, Love Affairs and Luxurious Lifestyle
Published: 2017/08/02
Channel: Success Phantom
Income Tax ! Class 1! Basic Concepts ! Income Tax Rates AYs 2018-19 ! UGC NET COMMERCE JULY 2018
Income Tax ! Class 1! Basic Concepts ! Income Tax Rates AYs 2018-19 ! UGC NET COMMERCE JULY 2018
Published: 2018/04/11
Channel: Commerce Meri Jaan
What is Net Income?
What is Net Income?
Published: 2012/09/22
Channel: The Motley Fool
BTS - Net Worth 2018 / Income 100mill $
BTS - Net Worth 2018 / Income 100mill $
Published: 2018/05/20
Channel: Exin K-POP
Overstated Beginning Inventory Effect on Net Income
Overstated Beginning Inventory Effect on Net Income
Published: 2015/05/26
Channel: ehowfinance
Difference between net income and comprehensive income
Difference between net income and comprehensive income
Published: 2012/09/10
Channel: LoscalzoAssoc
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WIKIPEDIA ARTICLE

From Wikipedia, the free encyclopedia
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In business and accounting, net income (total comprehensive income, net earnings, net profit, bottom line, gross profit, gross margin, sales profit, or credit sales) is an entity's income minus cost of goods sold, expenses and taxes for an accounting period.[1] It is computed as the residual of all revenues and gains over all expenses and losses for the period,[2] and has also been defined as the net increase in shareholders' equity that results from a company's operations.[3] In the context of the presentation of financial statements, the IFRS Foundation defines net income as synonymous with profit and loss.[1] The difference between revenue and the cost of making a product or providing a service, before deducting overheads, payroll, taxation, and interest payments. This is different from operating profit (earnings before interest and taxes).[4]

A common synonym for net profit when discussing financial statements (which include a balance sheet and an income statement) is the bottom line. This term results from the traditional appearance of an income statement which shows all allocated revenues and expenses over a specified time period with the resulting summation on the bottom line of the report.

In simplistic terms, net profit is the money left over after paying all the expenses of an endeavor. In practice this can get very complex in large organizations or endeavors. The bookkeeper or accountant must itemise and allocate revenues and expenses properly to the specific working scope and context in which the term is applied.

Definitions of the term can, however, vary between the UK and US. In the US, net profit is often associated with net income or profit after tax (see table below).

The net profit margin percentage is a related ratio. This figure is calculated by dividing net profit by revenue or turnover, and it represents profitability, as a percentage.

It is a measure of the profitability of a venture after accounting for all costs and taxes. It is the actual profit, and includes the operating expenses that are excluded from gross profit.

Net income is usually calculated per annum, for each fiscal year. It is the same as net profit but a distinct accounting concept from profit, i.e. the amount of money the company has made before its company-specific deductions are subtracted. Net income can also be calculated by adding a company's operating income to non-operating income and then subtracting off taxes.[5]

"How does a company decide whether it is successful or not? Probably the most common way is to look at the net profits of the business. Given that companies are collections of projects and markets, individual areas can be judged on how successful they are at adding to the corporate net profit."[6]

Definition[edit]

Net income can be distributed among holders of common stock as a dividend or held by the firm as an addition to retained earnings. As profit and earnings are used synonymously for income (also depending on UK and US usage), net earnings and net profit are commonly found as synonyms for net income. Often, the term income is substituted for net income, yet this is not preferred due to the possible ambiguity. 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).

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.

Cost of goods sold is calculated differently for a merchandising business than for a manufacturer.

An equation for net income[edit]

Net profit: To calculate net profit for a venture (such as a company, division, or project), subtract all costs, including a fair share of total corporate overheads, from the gross revenues or turnover.

Net profit = sales revenue − total costs

Net profit is a measure of the fundamental profitability of the venture. "It is the revenues of the activity less the costs of the activity. The main complication is . . . when needs to be allocated" across ventures. "Almost by definition, overheads are costs that cannot be directly tied to any specific" project, product, or division. "The classic example would be the cost of headquarters staff." "Although it is theoretically possible to calculate profits for any sub-(venture), such as a product or region, often the calculations are rendered suspect by the need to allocate overhead costs." Because overhead costs generally don’t come in neat packages, their allocation across ventures is not an exact science.[7]

Example[edit]

Here is how you reach net profit on a P&L (Profit & Loss) account:

  1. Sales revenue = price (of product) × quantity sold
  2. Gross profit = sales revenue − cost of sales and other direct costs
  3. Operating profit = gross profit − overheads and other indirect costs
  4. EBIT (earnings before interest and taxes) = operating profit + non-operating income
  5. Pretax profit (EBT, earnings before taxes) = operating profit − one off items and redundancy payments, staff restructuring − interest payable
  6. Net profit = Pre-tax profit − tax
  7. Retained earnings = Profit after tax − dividends

Another equation to calculate net income:

Net sales (revenue) - Cost of goods sold = Gross profit - SG&A expenses (combined costs of operating the company) - Research and development (R&D) = Earnings before interest, taxes, depreciation and amortization (EBITDA) - Depreciation and amortization = Earnings before interest and taxes (EBIT) - Interest expense (cost of borrowing money) = Earnings before taxes (EBT) - Tax expense = Net income (EAT)

Another equation to calculate net income:

Net sales = gross sales – (customer discounts + returns + allowances)
Gross profit = net salescost of goods sold
Gross profit percentage = [(net salescost of goods sold)/net sales] × 100%.
Operating profit = gross profit – total operating expenses
Net income = operating profit – taxes – interest

Other terms[edit]

Net sales = gross sales – (customer discounts, returns, and allowances)
Gross profit = net salescost of goods sold
Operating profit = gross profit – total operating expenses
Net profit = operating profit – taxes – interest
Net profit = net salescost of goods soldoperating expense – taxes – interest

See also[edit]

References[edit]

  1. ^ a b "IAS 1 Presentation of Financial Statements" (PDF). IFRS Foundation. 2012. Retrieved April 14, 2012. 
  2. ^ Stickney, et al. (2009) Financial Accounting: An Introduction to Concepts, Methods, and Uses. Cengage Learning.
  3. ^ Needles, et al. (2010) Financial Accounting. Cengage Learning.
  4. ^ Horngren, Charles (2011). Accounting, 9th Edition. Upper Saddle River, New Jersey 07458: Prentice Hall. ISBN 0132569051. 
  5. ^ "Net Income Formula". New Business Playbook. Archived from the original on 2013-10-19. 
  6. ^ Farris, Paul W.; Neil T. Bendle; Phillip E. Pfeifer; David J. Reibstein (2010). Marketing Metrics: The Definitive Guide to Measuring Marketing Performance. Upper Saddle River, New Jersey: Pearson Education, Inc. ISBN 0137058292. Content from this book used in this article has been licensed for modification and reuse under the Creative Commons Attribute Share Alike 3.0 and Gnu Free Documentation licenses. See talk. The Marketing Accountability Standards Board (MASB) endorses the definitions, purposes, and constructs of classes of measures that appear in Marketing Metrics as part of its ongoing Common Language in Marketing Project.
  7. ^ Farris, Paul W.; Neil T. Bendle; Phillip E. Pfeifer; David J. Reibstein (2010). Marketing Metrics: The Definitive Guide to Measuring Marketing Performance. Upper Saddle River, New Jersey: Pearson Education, Inc. ISBN 0137058292. Content from this book used in this article has been licensed for modification and reuse under the Creative Commons Attribute Share Alike 3.0 and Gnu Free Documentation licenses. See talk. The Marketing Accountability Standards Board (MASB) endorses the definitions, purposes, and constructs of classes of measures that appear in Marketing Metrics as part of its ongoing Common Language in Marketing Project.

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