Net income is equal to the income that a firm has after subtracting costs and expenses from the total revenue. Income, refers to consumption opportunity gained by an entity within a specified time frame which is generally expressed in monetary terms In common usage an expense or expenditure is an outflow of Money to another person or group to pay for an item or service or for a category of costs In business revenue or revenues is Income that a company receives from its normal business activities usually from the sale of goods and services Net income can be distributed among holders of common stock as a dividend or held by the firm as retained earnings. Dividends are payments made by a Corporation to its Shareholder members In Accounting, retained earnings refers to the portion of Net income which is retained by the corporation rather than distributed to its owners as Dividends Net income is an accounting term; in some countries (such as the UK) profit is the usual term. The United Kingdom of Great Britain and Northern Ireland, commonly known as the United Kingdom, the UK or Britain,is a Sovereign state located Additionally, net income is called just income.

The items deducted will typically include tax expense, financing expense (interest expense), and minority interest. At its simplest a company's tax expense, or tax charge as it sometimes called is computed in by multiplying the income before tax number as reported to shareholders by the appropriate Interest expense relates to the Cost of borrowing money It is the price that a Lender charges a Borrower for the use of the lender's money 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. Merchandising refers to the methods practices and operations conducted to promote and sustain certain categories of commercial activity Generally a company is a form of Business organization. The precise definition varies For a product company advertising, manufacturing, and design and development costs are included. Advertising is a form of Communication that typically attempts to persuade potential Customers to Purchase or to consume more of a particular Brand Manufacturing (from Latin manu factura, "making by hand" is the use of tools and labor to make things for use or sale

Net income is informally called the bottom line because it is typically found on the last line of a company's income statement. An Income Statement, also called a Profit and Loss Statement (P&L is a financial statement for companies that indicates how Revenue (money (A related term is top line, meaning revenue, which forms the first line of the account statement. An Income Statement, also called a Profit and Loss Statement (P&L is a financial statement for companies that indicates how Revenue (money In business revenue or revenues is Income that a company receives from its normal business activities usually from the sale of goods and services )

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

See also