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Net Income Formula:
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Net Income (NI) is the final profit of a company after all expenses, including operating expenses and taxes, have been deducted from total revenue. It represents the actual earnings available to shareholders and for reinvestment in the business.
The calculator uses the Net Income formula:
Where:
Explanation: This formula calculates the bottom-line profit by subtracting all business expenses and tax obligations from the gross profit.
Details: Net income is a key indicator of a company's financial health and profitability. It's used by investors, creditors, and management to assess performance, make investment decisions, and determine dividend payments.
Tips: Enter gross profit, operating expenses, and taxes in the same currency unit. All values must be non-negative numbers representing monetary amounts.
Q1: What's the difference between gross profit and net income?
A: Gross profit is revenue minus cost of goods sold, while net income is gross profit minus all other expenses including operating expenses and taxes.
Q2: Can net income be negative?
A: Yes, when total expenses exceed gross profit, resulting in a net loss rather than net income.
Q3: How often should net income be calculated?
A: Typically calculated quarterly and annually for financial reporting, but can be calculated monthly for internal management purposes.
Q4: What expenses are included in operating expenses?
A: Operating expenses include salaries, rent, utilities, marketing, research and development, and other costs of running the business.
Q5: Why is net income important for investors?
A: Net income indicates a company's profitability and ability to generate returns for shareholders through dividends and stock price appreciation.