Net Income + Interest Expense + Taxes = Operating Net Income Operating income is sometimes referred to as EBIT, or “earnings before interest and taxes.” This can include things like income tax, interest expense, interest income, and gains or losses from sales of fixed assets. However, it looks at a company’s profits from operations alone without accounting for income and expenses that aren’t related to the core activities of the business. Operating net income is similar to net income. Using the formula above, you can find your company’s net income for any given period: annual, quarterly, or monthly-whichever timeframe works for your business.Īnother useful net income number to track is operating net income. If your total expenses are more than your revenues, you have a negative net income, also known as a net loss. When your company has more revenues than expenses, you have a positive net income. Total Revenues – Total Expenses = Net Income Or, if you really want to simplify things, you can express the net income formula as: So put another way, the net income formula is: (Check out our simple guide for how to calculate cost of goods sold). The first part of the formula, revenue minus cost of goods sold, is also the formula for gross income. Revenue – Cost of Goods Sold – Expenses = Net Income The formula for calculating net income is: It’s the amount of money you have left to pay shareholders, invest in new projects or equipment, pay off debts, or save for future use. Some people refer to net income as net earnings, net profit, or simply your “bottom line” (nicknamed from its location at the bottom of the income statement). Net income is your company’s total profits after deducting all business expenses.
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