What Is Net Income?

Patrick Curtis

Reviewed by

Patrick Curtis WSO Editorial Board

Expertise: Investment Banking | Private Equity

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.

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Patrick Curtis

Patrick Curtis is a member of WSO Editorial Board which helps ensure the accuracy of content across top articles on Wall Street Oasis. He has experience in investment banking at Rothschild and private equity at Tailwind Capital along with an MBA from the Wharton School of Business. He is also the founder and current CEO of Wall Street Oasis. This content was originally created by member WallStreetOasis.com and has evolved with the help of our mentors.