Glossary·Written by a CPA
Net income
Also called: The bottom line
A company's profit after every expense, including interest and taxes, has been subtracted from revenue.
Net income is the very last line of the income statement, which basically just means it's what's left after the company pays for everything... the cost of its products, salaries, marketing, research, interest on its debt, and taxes.
It's the number that earnings per share is built on, and it's the official GAAP measure of profit.
For you, net income is important, but it isn't cash. It includes noncash items like depreciation and impairments, and the timing of revenue and expenses can make it different from the cash the business actually brought in, so it's worth looking at it next to free cash flow.
The catch. One-time gains, like selling a division or a change in the value of an investment, can make net income jump in a way that won't repeat.
Where I talk about it
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- SMCI Stock: Why This $34 AI Stock Has a $57 Price Target at 1:54
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This is education, not tax or investment advice. I'm a CPA, but I'm not your CPA. Full disclaimer.