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 (is) and it is affected by taxation laws ( and EBIT are not), so it is less useful for valuation purposes than . For this reason, you very rarely see multiples including Net Income but almost all multiples include in some form.
Net Income is found on the Income Statement and Cash Flow Statement.
- Capital Structure
- Cash Flow Statement (CFS)
- Cost of Goods Sold (COGS)
- Earnings Before Interest & Tax (EBIT)
- Earnings Before Interest, Taxation, Depreciation & Amortization (EBITDA)
- Interest Expense
- Interest Income
- Income Statement (IS)
- Operating Expenses
- Stock-Based Compensation
- Trading Multiple