Net income, also known as net profit or bottom line, is the amount of money a business earns after deducting all expenses from its total revenue. It is a key measure of a company’s profitability and is found at the bottom of the income statement.

The formula for calculating net income is:
Net Income = Total Revenue – Total Expenses

These expenses include cost of goods sold (COGS), operating expenses, interest, taxes, and depreciation.

For example, if a company generates $500,000 in revenue and incurs $400,000 in total expenses, its net income would be $100,000. This means the business retained $100,000 in profit during that period.

Net income is important for both internal and external stakeholders. For management, it helps assess financial performance and supports decision-making. For investors and creditors, it provides insight into the company’s ability to generate returns and meet financial obligations.

Net income also plays a role in calculating earnings per share (EPS), a key indicator of shareholder value in publicly traded companies.

In summary, net income reflects the true profitability of a business after all costs are accounted for. It is a critical indicator of financial success and sustainability over time.