Net Income

How is it calculated?

Net Income = Revenue - Cost of Goods Sold - Operating Expenses +/- Non-Operating Income/Exp


Goal of the Ratio

The Net Income is the ultimate amount of profit generated by the business after all expenses have been paid.


When is it used?

All business situations


Rules of Thumb

Higher is better


What changes in the ratio could mean:

Some example reasons why Net Income can change:

  1. Changes in Revenue

  2. Changes in Gross Profit Margin

  3. Changs in Operating Expenses


Other Relevant Terms

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A bit about me

Greetings! I'm Clay Sharkey, and there is nothing I like more than assisting others in achieving their goals. I firmly believe that by enhancing a banker's understanding of their customer's' business, they can provide superior service. This superior service, in turn, leads to stronger relationships for the bank, improved performance for the businesses, and better experiences for our communities.  Win-win-win.