What Is Net Income?

Net Income refers to post-tax profit and is also known as net profit. The basic formula for net income is:

  • Revenue – All Costs + Interest Income – Interest Expense – Taxation

For example, if total revenue is $100mm, COGS and other Operating Expenses are $50mm, there is no interest income or expense and the company pays 35% tax, Net Income would be (100,000,000 – 50,000,000) * (1-0.35) = $32.5mm. Net Income is a measure of profitability but it is not capital-structure neutral (EBITDA is) and it is affected by taxation laws (EBITDA and EBIT are not), so it is less useful for valuation purposes than EBITDA. For this reason, you very rarely see multiples including Net Income but almost all multiples include EBITDA in some form. Net Income is found on the Income Statement and Cash Flow Statement.

To learn more about this concept and become a master at Financial Statement modeling, you should check out our FSM Modeling Course. Learn more here. 

Module 1: Getting Started

Module 2: Fundamental Concepts

Module 3: The Income Statement

Module 4: Working Capital

Module 5: PP&E and Intangibles

Module 6: The Cash Flow Statement

Module 7: Debt & Interest Schedule

Module 8: Finishing Your Model

Module 9: Bonus

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To learn more about this concept and become a master at valuation modeling, you should check out our Valuation Modeling Course. Learn more here.

Module 1: Introduction

Module 2: Valuation: The Big Picture

Module 3: Enterprise Value & Equity Value Practice

Module 4: Trading Comparables Introduction

Module 5: Trading Comps: The Setup

Module 6: Trading Comps: Spreading Nike (NKE)

Module 7: Trading Comps: Spreading Adidas (ADS.DE)

Module 8: Trading Comps: Spreading Lululemon (LULU)

Module 9: Trading Comps: Spreading Under Armour (UA)

Module 10: Trading Comps: Benchmarking and Outputs

Module 11: Precedent Transactions: Introduction

Module 12: Precedents: The Setup

Module 13: Spreading Tiffany & LVMH

Module 14: Spreading FitBit & Google

Module 15: Spreading Reebok & Adidas

Module 16: Spreading Jimmy Choo & Michael Kors

Module 17: Spreading Dickies & VF

Module 18: Valuation Wrap-Up

Module 19: Bonus: Non-GAAP Practice

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