Net Income ( NI )

Investment Formula Description

Net income ( NI )  is remaining profit for the company after subtracting all the expenses from total revenue in the a given financial period of time.

Net income ( NI ) is also referred as net profit since it is the actual profits or earnings after deducting all the expenses such as cost of goods sold ( COGS ), overhead , interest payable plus/minus one extraordinary items for a financial period ( usually one year) . If the outcome of net income ( NI ) is negative figure after deducting all the expenses, then it is called net loss. Net Income ( NI ) is commonly used together with profit margin. Sometimes, net income ( NI ) is also referred as net profit and both of them serve the same meaning.

Investment Formula

Net Income ( NI ) = Revenue - Cost of goods sold - Overhead - Interest Payable = Gross Profit - Overheads - Interest Payable

Investment Formula Example

For this financial period, Corporation A has total $50,000 revenue with $30,000 of COGS,  $10,000 of Overheads,  and $5,000 of Interest Payable.

Net Income ( NI ) = Revenue - Cost of goods sold - Overhead - Interest Payable = Gross Profit - Overheads - Interest Payable = 50,000 -  30,000 - 10,000 - 5,000 = $5,000

The net income ( NI ) or net profit for Corporation A is $5,000 for this financial period.

For the next financial period, the Overheads for Corporation A had increased to $12,500.

Net income ( NI ) = Revenue - Cost of goods sold - Overhead - Interest Payable = Gross Profit - Overheads - Interest Payable = 50,000 -  30,000 - 10,000 - 12,500 = - $2,500

In this case, Corporation A is having net loss of $2,500 for this financial period.