Meaning
Net income is profit after operating costs, interest, taxes and other expenses.
Formula
Revenue - expenses - interest - taxes
Practical reading
Positive and rising net income supports profitability, but one-off gains or losses should be checked.
Calculation detail
Net income is the residual after revenue, operating costs, interest, tax and other gains or losses. In simplified form: net income = revenue β all recognised expenses + or β non-operating items.
What to check
Review whether profit converts into operating cash flow and whether it is attributable to ordinary operations. Multi-year consistency is usually more useful than one exceptional year.
Limits and caveats
Impairments, asset sales, tax adjustments and accounting estimates can change reported profit without an equivalent change in the core business.