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Net Income
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Net income is equal to the income that a firm has after subtracting costs and expenses from the total revenue. Subtracting total costs, expenses, and taxes from total revenue results is the net income.
Net income is profit after non recurrent items and Tax. Net income is one of the most widely used accounting indicators of value creation. Net income is also called profit or Earnings or net profit.
Recurrent items are the everyday operations of the company relating to its Business Cycle, investment cycle, and financing cycle. Also called recurring items.
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.
Merchandising refers to the methods, practices and operations conducted to promote and sustain certain categories of commercial activity. The term is understood to have different specific meanings depending on the context.
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