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What is Net Income?

Net income is the amount of earnings left over once expenses have been deducted from sales. In short, it is the net amount of profit or loss.

It is calculated by taking total earnings in a period (such as a quarter), and deducting all elements of the cost of doing business (labor, depreciation, fixed expenses, overhead, etc…)

Net income is ultimately a measure of a company’s profitability, and its calculation should be scrutinized closely to ensure all expenses are being accounted for accurately.

A company should not necessarily be judged exclusively by looking at net income in a vacuum - start-ups may have several periods of negative net income which is common in an early growth phase.

Keywords: profits, overhead, corporate finance, net income, fixed expenses,