Reading the accounts
Net income
Also called Net profit, Bottom line or Earnings
What is left after every cost, including interest and tax — the profit belonging to shareholders.
How it works
Net income is the figure earnings per share is computed from, and therefore the one behind the P/E ratio.
Being the last line, it absorbs everything above it, including one-off gains and losses that say nothing about ongoing performance.
Where it misleads people
A single asset sale, legal settlement or tax adjustment can dominate net income in a given year. Reading the trend requires separating recurring profit from one-offs, which the statement itself does not do for you.
Related terms
- Earnings per shareNet income divided by the number of shares — the profit attributable to each share you own.
- Operating incomeProfit from the core business, before interest and tax.
- Net marginNet income as a percentage of revenue — what proportion of each sale ends up as profit.
- Adjusted earningsCompany-defined profit that excludes items management considers unrepresentative.
- Income statementThe statement showing revenue, costs and profit over a period.
Mentioned in
More in Reading the accounts
- Net debt / EBITDA
- Off-balance-sheet
- Net debt
- Liabilities
- Operating expenses
- Inventory
- Interest coverage
- Operating leverage
All 51 Reading the accounts terms · The full glossary, 433 terms
Educational reference only. Nothing here is investment advice or a recommendation to buy or sell anything, and tax treatment depends on your own circumstances and the country you are in.