Net Income & Related Terms : NobleTrading Blog

Tuesday, August 18, 2009

Net Income & Related Terms

Net Income or NI, also known as bottom line, aftertax profit and profit attributable to shareholders, is defined as the total income (profit) after all expenses and taxes deducted. It is one of the figures of great importance in a company’s financial statement. This figure, usually found at the bottom line of a statement is the basis of calculating the key fundamentals of a stock such as price-earnings ratio (PER), earnings per share (EPS) and return on equity. Net income is also widely used to compare a company’s performance with its historical performance, industry performance and with other companies.

There are also some related terms.

Gross Income: Is the total earnings of a company minus the cost of goods. This does not consider any taxes, incidental incomes or operating expenses.
Net Operating Income or NOI: This is the total income of the company after all operating expenses are deducted. This does not consider any taxes or interests. Many investors take this as an analysis figure, as it is believed to be less susceptible for manipulations.
Net Income after Taxes or NIAT: It is the total income of a company after deducting all expenses; and is often the same as net income. This is shown in both per share figure and in dollar figure. Recent scandals related to this figure in financial statements has made this not 100 percentage trustable.