How to Calculate Net Income

Net income, sometimes called total earnings or profit, is how much money a company retains after doling out the costs of doing business. Find out how to get your bottom line.

Instructions

  • Step 1: Know that there are ways that firms can manipulate revenue and expense numbers. When deciding on an investment based on this value, try comparing one quarter to the next or one company to another.
  • FACT: Net income is often called "the bottom line," since this figure is listed at the bottom of the income statement.
  • TIP: In addition to measuring how profitable a company is over a period of time, net income is also used to calculate earnings per share.
  • Step 2: Deduct tax from the earnings before tax amount to reach the net income number.
  • Step 3: Subtract the cost of sales and any other expenses that the company incurred during the period. This number represents earnings before tax.
  • Step 4: Begin with the firm's total revenue, which may be found on the company's income statement.

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