Net Income

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:

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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