{"id":27653,"date":"2026-07-30T10:41:05","date_gmt":"2026-07-30T14:41:05","guid":{"rendered":"https:\/\/www.sage.com\/en-us\/blog\/?p=27653"},"modified":"2026-07-30T10:41:44","modified_gmt":"2026-07-30T14:41:44","slug":"net-income-formula","status":"publish","type":"post","link":"https:\/\/www.sage.com\/en-us\/blog\/net-income-formula\/","title":{"rendered":"How to calculate Net Income (NI): formula and guide"},"content":{"rendered":"<header class=\"entry-header has-dark-background-color entry-header--standard entry-header--has-illustration entry-header--has-illustration--standard\">\n\t<div class=\"container\">\n\t\t<div class=\"entry-header__row row align-center\">\n\t\t\t<div class=\"col col-lg-7 col-xlg-6 entry-header__content\">\n\t\t\t\t\t\t\t<div class=\"component component-single-header\">\n\t\t\t\t\t\t\t\t\t\t<div class=\"entry-header__misc text--subtitle text--uppercase text--small\">\n\t\t\t\t\t\t\t<a href=\"https:\/\/www.sage.com\/en-us\/blog\/category\/money-matters\/\" class=\"entry-header__link\">Money Matters<\/a>\t\t\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t<div class=\"entry-title-wrapper\">\n\t\t\t\t\t<h1 class=\"entry-title\">\n\t\t\t\t\t\tHow to calculate Net Income (NI): formula and guide\t\t\t\t\t<\/h1>\n\t\t\t\t<\/div>\n\n\t\t\t\t\t\t\t\t\t<p class=\"entry-header__description\">\n\t\t\t\t\t\tLearn how to calculate Net Income (NI), including the formula to use, and discover how it can help you measure profitability, track financial performance, and make smarter business decisions.\t\t\t\t\t<\/p>\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\n\t\t\t<\/div>\n\n\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t<\/div>\n\t\t<div class=\"single-post-details container\">\n\t\t<div class=\"col\">\n\t\t\t<span class=\"posted-on \">Published <time class=\"entry-date published\" datetime=\"2026-07-30T10:41:05-04:00\">July 30, 2026<\/time><\/span><span class=\"reading-time\"> min read<\/span>\n\t\t<button\n\t\t\ttype=\"button\"\n\t\t\tclass=\"social-share-button button button--icon button--secondary js-social-share-button\"\n\t\t\tdata-share-title=\"How to calculate Net Income (NI): formula and guide\"\n\t\t\tdata-share-url=\"https:\/\/www.sage.com\/en-us\/blog\/net-income-formula\/\"\n\t\t\tdata-share-text=\"Please read this interesting article\"\n\t\t>\n\t\t\t<span class=\"social-share-button__share-label\">Share<\/span>\n\t\t\t<span class=\"social-share-button__copy-label\" hidden>Copy Link<\/span>\n\t\t\t<span class=\"social-share-button__copy-tooltip\" aria-hidden=\"true\" hidden>Copied<\/span>\n\t\t<\/button>\n\n\t\t\t\t<\/div>\n\t<\/div>\n\t<\/header>\n\n\n\n<div class=\"wp-block-post-author has-dark-background-color alignfull\">\n\t<div class=\"container\">\n\t\t<div class=\"col\">\n\t\t\t\t\t\t\t<div class=\"co-authors\">\n\t\t\t\t\t\n\t\t<div class=\"entry-author-wrapper\">\n\t\t\t<a class=\"entry-author\" href=\"https:\/\/www.sage.com\/en-us\/blog\/author\/yassirmalik\/\">\n\t\t\t\t<img loading=\"lazy\" decoding=\"async\" width=\"40\" height=\"40\" src=\"https:\/\/www.sage.com\/en-us\/blog\/wp-content\/uploads\/sites\/2\/2024\/03\/Yassir-Malik.jpg\" class=\"entry-author__image\" alt=\"yassir-malik-profile-picture\" \/>\t\t\t\t<span class=\"entry-author__name\">Yassir Malik<\/span>\n\t\t\t<\/a>\n\n\t\t\t\t\t<\/div>\n\n\t\t\n\t\t<div class=\"entry-author-wrapper\">\n\t\t\t<a class=\"entry-author\" href=\"https:\/\/www.sage.com\/en-us\/blog\/author\/lauraslingo\/\">\n\t\t\t\t<img loading=\"lazy\" decoding=\"async\" width=\"40\" height=\"40\" src=\"https:\/\/www.sage.com\/en-us\/blog\/wp-content\/uploads\/sites\/2\/2026\/03\/laura-slingo-headshot-350x350.jpg\" class=\"entry-author__image\" alt=\"Laura Slingo\" srcset=\"https:\/\/www.sage.com\/en-us\/blog\/wp-content\/uploads\/sites\/2\/2026\/03\/laura-slingo-headshot-350x350.jpg 350w, https:\/\/www.sage.com\/en-us\/blog\/wp-content\/uploads\/sites\/2\/2026\/03\/laura-slingo-headshot.jpg 400w\" sizes=\"auto, (max-width: 40px) 100vw, 40px\" \/>\t\t\t\t<span class=\"entry-author__name\">Laura Slingo<\/span>\n\t\t\t<\/a>\n\n\t\t\t\t\t<\/div>\n\n\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t<\/div>\n<\/div>\n\n\n\n<section class=\"wp-block-sage-article-update\"><div class=\"sage-article-update__inner\"><p>This article was originally published on February 5, 2025 but has been refreshed and re-published with new content on July 30, 2026.<\/p><\/div><\/section>\n\n\n\n<p class=\"wp-block-paragraph\">Revenue tells you how much money your business brings in. Net Income (NI) tells you how much you keep.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Net income is the profit remaining after you subtract all business expenses from total revenue, including payroll, rent, inventory, interest, and taxes. It is one of the simplest ways to see whether your business is truly profitable.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">In this guide, you&#8217;ll learn what net income is, what the net income formula is, how to calculate net income, where to find it on your financial statements, and how it compares with other key profitability metrics.<\/p>\n\n\n<section id=\"key-takeaways\" class=\"wp-block-sage-key-takeaways\"><div class=\"sage-key-takeaways__inner\"><h2 class=\"wp-block-heading has-h-3-font-size\">Key takeaways<\/h2>\n<ul class=\"wp-block-list\">\n<li>Net income is the profit remaining after all business expenses have been deducted from total revenue.<\/li>\n\n\n\n<li>The basic net income formula is: <strong>Total revenue \u2013 Total expenses = Net income.<\/strong><\/li>\n\n\n\n<li>Net income helps you measure profitability, monitor financial performance, and make informed business decisions.<\/li>\n\n\n\n<li>Net income is typically reported at the bottom of the income statement, but it can also be estimated using balance sheet information when an income statement isn&#8217;t available.<\/li>\n<\/ul>\n<\/div><\/section>\n\n\n<h3 id=\"h-here-s-what-we-ll-cover\" class=\"wp-block-heading\">Here&#8217;s what we&#8217;ll cover<\/h3>\n\n\n<?xml encoding=\"utf-8\" ?><div class=\"wp-block-yoast-seo-table-of-contents yoast-table-of-contents\"><ul><li><a href=\"#h-what-is-net-income-ni\" data-level=\"2\">What is net income (NI)?<\/a><\/li><li><a href=\"#h-net-income-formula-example\" data-level=\"2\">Net income formula example<\/a><\/li><li><a href=\"#h-where-is-net-income-shown-on-an-income-statement\" data-level=\"2\">Where is net income shown on an income statement?<\/a><\/li><li><a href=\"#h-how-to-calculate-net-income-from-the-balance-sheet\" data-level=\"2\">How to calculate net income from the balance sheet<\/a><\/li><li><a href=\"#h-what-s-the-difference-between-net-income-and-gross-income\" data-level=\"2\">What&rsquo;s the difference between net income and gross income?<\/a><\/li><li><a href=\"#h-what-s-the-difference-between-net-income-and-operating-income\" data-level=\"2\">What&rsquo;s the difference between net income and operating income?<\/a><\/li><li><a href=\"#h-what-s-the-difference-between-net-income-ebit-and-ebitda\" data-level=\"2\">What&rsquo;s the difference between net income, EBIT, and EBITDA?<\/a><\/li><li><a href=\"#h-what-are-the-limitations-of-net-income\" data-level=\"2\">What are the limitations of net income?<\/a><\/li><li><a href=\"#h-take-control-of-your-finances-with-accurate-net-income-tracking\" data-level=\"2\">Take control of your finances with accurate net income tracking<\/a><\/li><li><a href=\"#h-frequently-asked-questions-about-net-income-formula\" data-level=\"2\">Frequently asked questions about net income formula<\/a><\/li><\/ul><\/div>\n\n\n\n<h2 id=\"h-what-is-net-income-ni\" class=\"wp-block-heading\">What is net income (NI)?<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Net income is the profit left after your business subtracts all expenses from total revenue. These expenses include the Cost of Goods Sold (COGS), operating expenses, interest, and taxes.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">It&#8217;s also called net profit, net earnings, or simply, the &#8220;bottom line.&#8221;<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">If your <strong>revenue is higher than your total expenses<\/strong>, your business has a <strong>positive net income<\/strong>.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">If your <strong>expenses are higher than your revenue<\/strong>, your business has a <strong>net loss<\/strong>.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Net income is one of the clearest indicators of profitability and financial performance. Knowing how to calculate it can help you <a href=\"https:\/\/www.sage.com\/en-us\/blog\/how-to-track-business-expenses\/\">track business performance<\/a>, make informed decisions, and plan for future growth.<\/p>\n\n\n\n<figure data-wp-context=\"{&quot;imageId&quot;:&quot;6a9b8bfc1ff6b&quot;}\" data-wp-interactive=\"core\/image\" data-wp-key=\"6a9b8bfc1ff6b\" class=\"wp-block-image size-large wp-lightbox-container\"><img loading=\"lazy\" decoding=\"async\" width=\"1440\" height=\"693\" data-wp-class--hide=\"state.isContentHidden\" data-wp-class--show=\"state.isContentVisible\" data-wp-init=\"callbacks.setButtonStyles\" data-wp-on--click=\"actions.showLightbox\" data-wp-on--load=\"callbacks.setButtonStyles\" data-wp-on--pointerdown=\"actions.preloadImage\" data-wp-on--pointerenter=\"actions.preloadImageWithDelay\" data-wp-on--pointerleave=\"actions.cancelPreload\" data-wp-on-window--resize=\"callbacks.setButtonStyles\" src=\"https:\/\/www.sage.com\/en-us\/blog\/wp-content\/uploads\/sites\/2\/2025\/01\/net-income-banners-011-1440x693.jpg\" alt=\"Illustration of a person standing near a large, old-fashioned cash register with green bar graphs on top. Text reads Net income is also referred to as net profit, net earnings, or the bottom line.\" class=\"wp-image-27654\" srcset=\"https:\/\/www.sage.com\/en-us\/blog\/wp-content\/uploads\/sites\/2\/2025\/01\/net-income-banners-011-1440x693.jpg 1440w, https:\/\/www.sage.com\/en-us\/blog\/wp-content\/uploads\/sites\/2\/2025\/01\/net-income-banners-011-768x370.jpg 768w, https:\/\/www.sage.com\/en-us\/blog\/wp-content\/uploads\/sites\/2\/2025\/01\/net-income-banners-011.jpg 1458w\" sizes=\"auto, (max-width: 1440px) 100vw, 1440px\" \/><button\n\t\t\tclass=\"lightbox-trigger\"\n\t\t\ttype=\"button\"\n\t\t\taria-haspopup=\"dialog\"\n\t\t\tdata-wp-bind--aria-label=\"state.thisImage.triggerButtonAriaLabel\"\n\t\t\tdata-wp-init=\"callbacks.initTriggerButton\"\n\t\t\tdata-wp-on--click=\"actions.showLightbox\"\n\t\t\tdata-wp-style--right=\"state.thisImage.buttonRight\"\n\t\t\tdata-wp-style--top=\"state.thisImage.buttonTop\"\n\t\t>\n\t\t\t<svg xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"12\" height=\"12\" fill=\"none\" viewBox=\"0 0 12 12\">\n\t\t\t\t<path fill=\"#fff\" d=\"M2 0a2 2 0 0 0-2 2v2h1.5V2a.5.5 0 0 1 .5-.5h2V0H2Zm2 10.5H2a.5.5 0 0 1-.5-.5V8H0v2a2 2 0 0 0 2 2h2v-1.5ZM8 12v-1.5h2a.5.5 0 0 0 .5-.5V8H12v2a2 2 0 0 1-2 2H8Zm2-12a2 2 0 0 1 2 2v2h-1.5V2a.5.5 0 0 0-.5-.5H8V0h2Z\" \/>\n\t\t\t<\/svg>\n\t\t<\/button><\/figure>\n\n\n\n<h2 id=\"h-how-to-calculate-net-income\" class=\"wp-block-heading\"><strong>How to calculate net income<\/strong><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">To calculate net income, subtract your total business expenses from your total revenue for a specific reporting period.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Before you start, make sure your revenue and expense figures are complete and accurate. To calculate net income, simply subtract total expenses from total revenue for the reporting period using the basic net income formula (also called the NI formula):<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Total revenue \u2013 Total expenses = Net income<\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">You may also see the formula shown in more detail as:<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Total revenue \u2013 Cost of goods sold \u2013 Operating expenses \u2013 Interest \u2013 Taxes = Net income<\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Both versions of the accounting formula for net income can produce the same result, as long as &#8220;total expenses&#8221; includes all costs for the period, such as <a href=\"https:\/\/www.sage.com\/en-us\/blog\/glossary\/cost-goods-sold-cogs\/\">COGS<\/a>, operating expenses, interest, taxes, and any other business expenses.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">When using the net income formula (or NI formula), it&#8217;s important to understand what each component means:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Total revenue:<\/strong> the total income your business earns from selling products or services during a specific period.<\/li>\n\n\n\n<li><strong>COGS:<\/strong> the direct costs of producing or purchasing the goods or services you sell, such as raw materials, manufacturing costs, or inventory.<\/li>\n\n\n\n<li><strong>Total expenses:<\/strong> the full cost of running your business during the reporting period, including COGS, operating expenses, interest, taxes, and other business expenses.<\/li>\n\n\n\n<li><strong>Gross income:<\/strong> also called gross profit, this is the amount remaining after subtracting COGS from total revenue, before deducting operating expenses, interest, and taxes.<\/li>\n<\/ul>\n\n\n\n<h2 id=\"h-net-income-formula-example\" class=\"wp-block-heading\">Net income formula example<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">To see how the net income formula works in practice, imagine you run a retail store that generates $500,000 in total revenue for the year.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Your business has the following expenses:<\/p>\n\n\n\n<figure class=\"wp-block-table\"><table class=\"has-fixed-layout\"><thead><tr><th>Item<\/th><th>Amount<\/th><\/tr><\/thead><tbody><tr><td>COGS<strong><\/strong><\/td><td>$200,000<\/td><\/tr><tr><td>Operating expenses<strong><\/strong><\/td><td>$160,000<\/td><\/tr><tr><td>Interest<strong><\/strong><\/td><td>$9,000<\/td><\/tr><tr><td>Taxes<strong><\/strong><\/td><td>$11,000<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<p class=\"wp-block-paragraph\">Using the detailed formula:<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Total revenue \u2013 Cost of goods sold \u2013 Operating expenses &nbsp;\u2013 Interest \u2013 Taxes = Net income<\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The calculation would look like this:<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>$500,000 \u2013 $200,000 \u2013 $160,000 \u2013 $9,000 \u2013 $11,000 = $120,000<\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">You can also use the simplified net income formula:<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Total revenue \u2013 Total expenses = Net income<\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">In this example, total expenses equal <strong>$380,000<\/strong>, so the calculation becomes:<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>$500,000 \u2013 $380,000 = $120,000<\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">In both cases, the result is the same. The business keeps $120,000 in net income for the year.<\/p>\n\n\n\n<h2 id=\"h-where-is-net-income-shown-on-an-income-statement\" class=\"wp-block-heading\">Where is net income shown on an income statement?<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Net income appears at the bottom of the income statement after all revenue, costs, and expenses have been accounted for. That&#8217;s why it&#8217;s often referred to as the &#8220;bottom line.&#8221;<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">An <a href=\"https:\/\/www.sage.com\/en-us\/blog\/income-statement-template\/\">income statement<\/a> starts with total revenue, then subtracts the COGS, operating expenses, interest, taxes, and any other applicable expenses.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The final figure shows how much profit the business made during the reporting period, after all costs were deducted. In simple terms, it shows what was left after the business earned revenue and paid its costs.<\/p>\n\n\n\n<figure data-wp-context=\"{&quot;imageId&quot;:&quot;6a9b8bfc21142&quot;}\" data-wp-interactive=\"core\/image\" data-wp-key=\"6a9b8bfc21142\" class=\"wp-block-image size-large wp-lightbox-container\"><img loading=\"lazy\" decoding=\"async\" width=\"1027\" height=\"810\" data-wp-class--hide=\"state.isContentHidden\" data-wp-class--show=\"state.isContentVisible\" data-wp-init=\"callbacks.setButtonStyles\" data-wp-on--click=\"actions.showLightbox\" data-wp-on--load=\"callbacks.setButtonStyles\" data-wp-on--pointerdown=\"actions.preloadImage\" data-wp-on--pointerenter=\"actions.preloadImageWithDelay\" data-wp-on--pointerleave=\"actions.cancelPreload\" data-wp-on-window--resize=\"callbacks.setButtonStyles\" src=\"https:\/\/www.sage.com\/en-us\/blog\/wp-content\/uploads\/sites\/2\/2025\/01\/net-income-banners-021-1027x810.jpg\" alt=\"An income statement showing operating expenses, EBIT, and net income. The net income is highlighted, with a note stating Net Income = the bottom line at the end. The Sage logo is displayed at the bottom right.\" class=\"wp-image-27655\" srcset=\"https:\/\/www.sage.com\/en-us\/blog\/wp-content\/uploads\/sites\/2\/2025\/01\/net-income-banners-021-1027x810.jpg 1027w, https:\/\/www.sage.com\/en-us\/blog\/wp-content\/uploads\/sites\/2\/2025\/01\/net-income-banners-021-768x606.jpg 768w, https:\/\/www.sage.com\/en-us\/blog\/wp-content\/uploads\/sites\/2\/2025\/01\/net-income-banners-021.jpg 1458w\" sizes=\"auto, (max-width: 1027px) 100vw, 1027px\" \/><button\n\t\t\tclass=\"lightbox-trigger\"\n\t\t\ttype=\"button\"\n\t\t\taria-haspopup=\"dialog\"\n\t\t\tdata-wp-bind--aria-label=\"state.thisImage.triggerButtonAriaLabel\"\n\t\t\tdata-wp-init=\"callbacks.initTriggerButton\"\n\t\t\tdata-wp-on--click=\"actions.showLightbox\"\n\t\t\tdata-wp-style--right=\"state.thisImage.buttonRight\"\n\t\t\tdata-wp-style--top=\"state.thisImage.buttonTop\"\n\t\t>\n\t\t\t<svg xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"12\" height=\"12\" fill=\"none\" viewBox=\"0 0 12 12\">\n\t\t\t\t<path fill=\"#fff\" d=\"M2 0a2 2 0 0 0-2 2v2h1.5V2a.5.5 0 0 1 .5-.5h2V0H2Zm2 10.5H2a.5.5 0 0 1-.5-.5V8H0v2a2 2 0 0 0 2 2h2v-1.5ZM8 12v-1.5h2a.5.5 0 0 0 .5-.5V8H12v2a2 2 0 0 1-2 2H8Zm2-12a2 2 0 0 1 2 2v2h-1.5V2a.5.5 0 0 0-.5-.5H8V0h2Z\" \/>\n\t\t\t<\/svg>\n\t\t<\/button><\/figure>\n\n\n\n<h2 id=\"h-how-to-calculate-net-income-from-the-balance-sheet\" class=\"wp-block-heading\">How to calculate net income from the balance sheet<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Although net income is typically reported on the income statement, you can also estimate it using retained earnings and dividends.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The <a href=\"https:\/\/www.sage.com\/en-us\/blog\/what-why-balance-sheets-important\/\">balance sheet<\/a> shows what your business owns (assets), what it owes (liabilities), and what remains for the owners (equity) at a specific point in time. It doesn&#8217;t report net income directly. However, retained earnings can help you work backwards to estimate net income for a reporting period.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Here&#8217;s how:<\/p>\n\n\n\n<ol class=\"wp-block-list\">\n<li><strong>Find your retained earnings:<\/strong> retained earnings are usually shown in the equity section of the balance sheet. They represent the profits your business has kept after dividends have been paid.<\/li>\n\n\n\n<li><strong>Calculate the change in retained earnings:<\/strong> compare retained earnings at the beginning and end of the reporting period.<\/li>\n\n\n\n<li><strong>Add back any dividends paid:<\/strong> dividends reduce retained earnings, so adding them back helps you estimate the profit earned during the period.<\/li>\n<\/ol>\n\n\n\n<p class=\"wp-block-paragraph\">The formula is:<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Ending retained earnings \u2013 Beginning retained earnings + Dividends paid = Net income<\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">For example, suppose your business started the year with <strong>$300,000<\/strong> in retained earnings and ended the year with <strong>$450,000<\/strong>. During the same period, it paid <strong>$50,000<\/strong> in dividends.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>$450,000 \u2013 $300,000 + $50,000 = $200,000<\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Based on these figures, estimated net income for the year would be <strong>$200,000<\/strong>.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">This method can be useful when an income statement is not available, but the income statement is still the best source for calculating net income. For the most accurate result, check whether retained earnings were affected by any adjustments beyond net income and dividends.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><a href=\"https:\/\/www.sage.com\/en-us\/accounting-software\/\">Accounting software<\/a> can help keep income statements, retained earnings, dividends, and other adjustments accurate and up to date, so you can calculate net income with more confidence.<\/p>\n\n\n\n<figure data-wp-context=\"{&quot;imageId&quot;:&quot;6a9b8bfc21b9c&quot;}\" data-wp-interactive=\"core\/image\" data-wp-key=\"6a9b8bfc21b9c\" class=\"wp-block-image size-large wp-lightbox-container\"><img loading=\"lazy\" decoding=\"async\" width=\"1396\" height=\"810\" data-wp-class--hide=\"state.isContentHidden\" data-wp-class--show=\"state.isContentVisible\" data-wp-init=\"callbacks.setButtonStyles\" data-wp-on--click=\"actions.showLightbox\" data-wp-on--load=\"callbacks.setButtonStyles\" data-wp-on--pointerdown=\"actions.preloadImage\" data-wp-on--pointerenter=\"actions.preloadImageWithDelay\" data-wp-on--pointerleave=\"actions.cancelPreload\" data-wp-on-window--resize=\"callbacks.setButtonStyles\" src=\"https:\/\/www.sage.com\/en-us\/blog\/wp-content\/uploads\/sites\/2\/2025\/01\/net-income-banners-031-1396x810.jpg\" alt=\"A person sitting at a desk with a laptop. Text above them explains financial terms: Net Income is Total Revenue minus Total Expenses, Gross Income is Total Revenue minus Cost of Goods Sold, and Operating Income is Gross Income minus Operating Expenses.\" class=\"wp-image-27656\" srcset=\"https:\/\/www.sage.com\/en-us\/blog\/wp-content\/uploads\/sites\/2\/2025\/01\/net-income-banners-031-1396x810.jpg 1396w, https:\/\/www.sage.com\/en-us\/blog\/wp-content\/uploads\/sites\/2\/2025\/01\/net-income-banners-031-768x446.jpg 768w, https:\/\/www.sage.com\/en-us\/blog\/wp-content\/uploads\/sites\/2\/2025\/01\/net-income-banners-031.jpg 1458w\" sizes=\"auto, (max-width: 1396px) 100vw, 1396px\" \/><button\n\t\t\tclass=\"lightbox-trigger\"\n\t\t\ttype=\"button\"\n\t\t\taria-haspopup=\"dialog\"\n\t\t\tdata-wp-bind--aria-label=\"state.thisImage.triggerButtonAriaLabel\"\n\t\t\tdata-wp-init=\"callbacks.initTriggerButton\"\n\t\t\tdata-wp-on--click=\"actions.showLightbox\"\n\t\t\tdata-wp-style--right=\"state.thisImage.buttonRight\"\n\t\t\tdata-wp-style--top=\"state.thisImage.buttonTop\"\n\t\t>\n\t\t\t<svg xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"12\" height=\"12\" fill=\"none\" viewBox=\"0 0 12 12\">\n\t\t\t\t<path fill=\"#fff\" d=\"M2 0a2 2 0 0 0-2 2v2h1.5V2a.5.5 0 0 1 .5-.5h2V0H2Zm2 10.5H2a.5.5 0 0 1-.5-.5V8H0v2a2 2 0 0 0 2 2h2v-1.5ZM8 12v-1.5h2a.5.5 0 0 0 .5-.5V8H12v2a2 2 0 0 1-2 2H8Zm2-12a2 2 0 0 1 2 2v2h-1.5V2a.5.5 0 0 0-.5-.5H8V0h2Z\" \/>\n\t\t\t<\/svg>\n\t\t<\/button><\/figure>\n\n\n\n<h2 id=\"h-what-s-the-difference-between-net-income-and-gross-income\" class=\"wp-block-heading\">What\u2019s the difference between net income and gross income?<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Net income and gross income are both measures of profitability, but they show profit at different stages.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Gross income shows how much profit is left after subtracting the cost of goods sold from total revenue. Net income shows how much profit is left after all business expenses have been deducted.<\/p>\n\n\n\n<figure class=\"wp-block-table\"><table class=\"has-fixed-layout\"><thead><tr><th>Gross income<\/th><th>Net income<\/th><\/tr><\/thead><tbody><tr><td>Calculated by subtracting COGS from total revenue.<\/td><td>Calculated by subtracting all business expenses from total revenue.<\/td><\/tr><tr><td>Shows how profitable your core products or services are before operating expenses, interest, and taxes.<\/td><td>Shows your overall profitability after operating expenses, interest, taxes, and other business costs have been deducted.<\/td><\/tr><tr><td>Also known as gross profit.<\/td><td>Also known as net profit, net earnings, or the bottom line.<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<p class=\"wp-block-paragraph\">The formula for gross income is:<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Total revenue \u2013 Cost of goods sold = Gross income<\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">For example, if your business generates <strong>$500,000<\/strong> in revenue and has <strong>$200,000<\/strong> in COGS, your gross income would be <strong>$300,000<\/strong>.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Gross income shows how much profit your products or services generate before day-to-day business costs. Net income shows what is left once every cost has been included.<\/p>\n\n\n\n<h2 id=\"h-what-s-the-difference-between-net-income-and-operating-income\" class=\"wp-block-heading\">What\u2019s the difference between net income and operating income?<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Operating income shows how much profit your business makes from its core operations before interest and taxes. Net income shows your final profit after all expenses have been deducted.<\/p>\n\n\n\n<figure class=\"wp-block-table\"><table class=\"has-fixed-layout\"><thead><tr><th>Operating income<\/th><th>Net income<\/th><\/tr><\/thead><tbody><tr><td>Measures the profitability of your core business operations.<\/td><td>Measures your overall profitability after all expenses have been deducted.<\/td><\/tr><tr><td>Does not factor in interest and taxes.<\/td><td>Includes interest, taxes, and other non-operating gains or losses.<\/td><\/tr><tr><td>Helps evaluate how efficiently your day-to-day operations perform.<\/td><td>Helps assess your business&#8217;s overall financial performance.<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<p class=\"wp-block-paragraph\">Operating income is calculated by subtracting operating expenses from gross income:<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Gross income \u2013 Operating expenses = Operating income<\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">For example, if your business generates <strong>$500,000<\/strong> in revenue, has <strong>$200,000<\/strong> in COGS, and <strong>$150,000<\/strong> in operating expenses, your operating income would be <strong>$150,000<\/strong>.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Operating income is useful because it shows how profitable your core business activities are before financing costs and taxes. Net income goes further by including the final profit available after those are included.<\/p>\n\n\n\n<h2 id=\"h-what-s-the-difference-between-net-income-ebit-and-ebitda\" class=\"wp-block-heading\">What\u2019s the difference between net income, EBIT, and EBITDA?<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Net income, Earnings Before Interests and Taxes (EBIT), and Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) are profitability metrics. Each one shows profit at a different stage.<\/p>\n\n\n\n<figure class=\"wp-block-table\"><table class=\"has-fixed-layout\"><thead><tr><th>EBIT<\/th><th>EBITDA<\/th><th>Net income<\/th><\/tr><\/thead><tbody><tr><td>Measures earnings before interest and taxes.<\/td><td>Measures earnings before interest, taxes, depreciation, and amortization.<\/td><td>Measures overall profitability after all business expenses have been deducted.<\/td><\/tr><tr><td>Helps compare businesses before the impact of financing structures and tax rates.<\/td><td>Helps compare operating performance before depreciation, amortization, and other non-cash expenses.<\/td><td>Shows the business&#8217;s final profit after operating and non-operating expenses.<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<p class=\"wp-block-paragraph\">EBIT can be calculated using this formula:<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Net income + Interest + Taxes = EBIT<\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">For example, if your business has <strong>$120,000 <\/strong>in net income, <strong>$10,000<\/strong> in interest expenses, and <strong>$20,000<\/strong> in taxes, your EBIT would be <strong>$150,000<\/strong>.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">EBITDA builds on EBIT by adding back depreciation and amortization:<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>EBIT + Depreciation + Amortization = EBITDA<\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">If your business has <strong>$150,000<\/strong> in EBIT and <strong>$30,000<\/strong> in depreciation and amortization, your EBITDA would be <strong>$180,000<\/strong>.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">EBIT and EBITDA can help compare performance before certain costs are included. Net income gives the final profit figure because it includes operating expenses, non-operating expenses, interest, taxes, and other gains or losses.<\/p>\n\n\n\n<figure data-wp-context=\"{&quot;imageId&quot;:&quot;6a9b8bfc22b92&quot;}\" data-wp-interactive=\"core\/image\" data-wp-key=\"6a9b8bfc22b92\" class=\"wp-block-image size-large wp-lightbox-container\"><img loading=\"lazy\" decoding=\"async\" width=\"1440\" height=\"694\" data-wp-class--hide=\"state.isContentHidden\" data-wp-class--show=\"state.isContentVisible\" data-wp-init=\"callbacks.setButtonStyles\" data-wp-on--click=\"actions.showLightbox\" data-wp-on--load=\"callbacks.setButtonStyles\" data-wp-on--pointerdown=\"actions.preloadImage\" data-wp-on--pointerenter=\"actions.preloadImageWithDelay\" data-wp-on--pointerleave=\"actions.cancelPreload\" data-wp-on-window--resize=\"callbacks.setButtonStyles\" src=\"https:\/\/www.sage.com\/en-us\/blog\/wp-content\/uploads\/sites\/2\/2025\/01\/net-income-banners-041-1440x694.jpg\" alt=\"Illustration of a person holding a green dollar sign and book. Text reads: Net Income includes every cost: operational, financial, and tax-related. This shows exactly how much youre making after all expenses are covered. Text is in green and white.\" class=\"wp-image-27657\" srcset=\"https:\/\/www.sage.com\/en-us\/blog\/wp-content\/uploads\/sites\/2\/2025\/01\/net-income-banners-041-1440x694.jpg 1440w, https:\/\/www.sage.com\/en-us\/blog\/wp-content\/uploads\/sites\/2\/2025\/01\/net-income-banners-041-768x370.jpg 768w, https:\/\/www.sage.com\/en-us\/blog\/wp-content\/uploads\/sites\/2\/2025\/01\/net-income-banners-041.jpg 1458w\" sizes=\"auto, (max-width: 1440px) 100vw, 1440px\" \/><button\n\t\t\tclass=\"lightbox-trigger\"\n\t\t\ttype=\"button\"\n\t\t\taria-haspopup=\"dialog\"\n\t\t\tdata-wp-bind--aria-label=\"state.thisImage.triggerButtonAriaLabel\"\n\t\t\tdata-wp-init=\"callbacks.initTriggerButton\"\n\t\t\tdata-wp-on--click=\"actions.showLightbox\"\n\t\t\tdata-wp-style--right=\"state.thisImage.buttonRight\"\n\t\t\tdata-wp-style--top=\"state.thisImage.buttonTop\"\n\t\t>\n\t\t\t<svg xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"12\" height=\"12\" fill=\"none\" viewBox=\"0 0 12 12\">\n\t\t\t\t<path fill=\"#fff\" d=\"M2 0a2 2 0 0 0-2 2v2h1.5V2a.5.5 0 0 1 .5-.5h2V0H2Zm2 10.5H2a.5.5 0 0 1-.5-.5V8H0v2a2 2 0 0 0 2 2h2v-1.5ZM8 12v-1.5h2a.5.5 0 0 0 .5-.5V8H12v2a2 2 0 0 1-2 2H8Zm2-12a2 2 0 0 1 2 2v2h-1.5V2a.5.5 0 0 0-.5-.5H8V0h2Z\" \/>\n\t\t\t<\/svg>\n\t\t<\/button><\/figure>\n\n\n\n<h2 id=\"h-why-is-net-income-important\" class=\"wp-block-heading\"><strong>Why is net income important?<\/strong><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Net income matters because it shows what your business keeps after costs. Revenue can show growth, but net income shows whether that growth is turning into profit.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Here&#8217;s why it matters:<\/p>\n\n\n\n<h3 id=\"h-show-what-the-business-really-keeps\" class=\"wp-block-heading\"><strong>Show what the business really keeps<\/strong><\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Unlike gross income or operating income, net income includes operating expenses, interest, taxes and other costs, giving you the clearest picture of your business&#8217;s overall profitability.<\/p>\n\n\n\n<h3 id=\"h-helps-you-make-better-decisions\" class=\"wp-block-heading\"><strong>Helps you make better decisions<\/strong><\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Tracking net income can help you decide whether to reinvest in the business, expand operations, reduce costs, or protect cash flow. It can also give investors and lenders more confidence in your company\u2019s financial performance.<\/p>\n\n\n\n<h3 id=\"h-show-performance-over-time\" class=\"wp-block-heading\"><strong>Show performance over time<\/strong><\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Comparing net income over time helps you identify trends, measure the impact of business decisions, and see whether profitability is improving or declining.<\/p>\n\n\n\n<h3 id=\"h-supports-business-valuation\" class=\"wp-block-heading\"><strong>Supports business valuation<\/strong><\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Net income is commonly used in business valuations and financial ratios, such as the Price-to-Earnings (P\/E) ratio for public companies. Strong, consistent profitability can help improve your business&#8217;s valuation and financing opportunities.<\/p>\n\n\n\n<h3 id=\"h-supports-financial-reporting\" class=\"wp-block-heading\"><strong>Supports financial reporting<\/strong><\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Net income is reported on the income statement and plays an important role in <a href=\"https:\/\/www.sage.com\/en-us\/accounting-software\/financial-reporting\/\">financial reporting<\/a>, regulatory compliance, and performance analysis.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Ultimately, net income is one of the clearest measures of your business&#8217;s overall financial performance. Monitoring net income regularly helps you understand how your business is performing and where action may be needed.<\/p>\n\n\n\n<figure data-wp-context=\"{&quot;imageId&quot;:&quot;6a9b8bfc23607&quot;}\" data-wp-interactive=\"core\/image\" data-wp-key=\"6a9b8bfc23607\" class=\"wp-block-image size-large wp-lightbox-container\"><img loading=\"lazy\" decoding=\"async\" width=\"1440\" height=\"736\" data-wp-class--hide=\"state.isContentHidden\" data-wp-class--show=\"state.isContentVisible\" data-wp-init=\"callbacks.setButtonStyles\" data-wp-on--click=\"actions.showLightbox\" data-wp-on--load=\"callbacks.setButtonStyles\" data-wp-on--pointerdown=\"actions.preloadImage\" data-wp-on--pointerenter=\"actions.preloadImageWithDelay\" data-wp-on--pointerleave=\"actions.cancelPreload\" data-wp-on-window--resize=\"callbacks.setButtonStyles\" src=\"https:\/\/www.sage.com\/en-us\/blog\/wp-content\/uploads\/sites\/2\/2025\/01\/net-income-banners-051-1440x736.jpg\" alt=\"A person juggles balls, with one hand balancing a green ball labeled net income. The text reads, Net income does not reflect the actual cash moving in and out of your business on a black background.\" class=\"wp-image-27658\" srcset=\"https:\/\/www.sage.com\/en-us\/blog\/wp-content\/uploads\/sites\/2\/2025\/01\/net-income-banners-051-1440x736.jpg 1440w, https:\/\/www.sage.com\/en-us\/blog\/wp-content\/uploads\/sites\/2\/2025\/01\/net-income-banners-051-768x392.jpg 768w, https:\/\/www.sage.com\/en-us\/blog\/wp-content\/uploads\/sites\/2\/2025\/01\/net-income-banners-051.jpg 1458w\" sizes=\"auto, (max-width: 1440px) 100vw, 1440px\" \/><button\n\t\t\tclass=\"lightbox-trigger\"\n\t\t\ttype=\"button\"\n\t\t\taria-haspopup=\"dialog\"\n\t\t\tdata-wp-bind--aria-label=\"state.thisImage.triggerButtonAriaLabel\"\n\t\t\tdata-wp-init=\"callbacks.initTriggerButton\"\n\t\t\tdata-wp-on--click=\"actions.showLightbox\"\n\t\t\tdata-wp-style--right=\"state.thisImage.buttonRight\"\n\t\t\tdata-wp-style--top=\"state.thisImage.buttonTop\"\n\t\t>\n\t\t\t<svg xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"12\" height=\"12\" fill=\"none\" viewBox=\"0 0 12 12\">\n\t\t\t\t<path fill=\"#fff\" d=\"M2 0a2 2 0 0 0-2 2v2h1.5V2a.5.5 0 0 1 .5-.5h2V0H2Zm2 10.5H2a.5.5 0 0 1-.5-.5V8H0v2a2 2 0 0 0 2 2h2v-1.5ZM8 12v-1.5h2a.5.5 0 0 0 .5-.5V8H12v2a2 2 0 0 1-2 2H8Zm2-12a2 2 0 0 1 2 2v2h-1.5V2a.5.5 0 0 0-.5-.5H8V0h2Z\" \/>\n\t\t\t<\/svg>\n\t\t<\/button><\/figure>\n\n\n\n<h2 id=\"h-what-are-the-limitations-of-net-income\" class=\"wp-block-heading\">What are the limitations of net income?<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Net income is useful, but it is not the whole story. A business can report a profit and still face cash pressure, unusual costs, or accounting adjustments that change how the number should be interpreted.<\/p>\n\n\n\n<h3 id=\"h-net-income-doesn-t-equal-cash-flow\" class=\"wp-block-heading\"><strong>Net income doesn&#8217;t equal cash flow<\/strong><\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Net income shows profitability, but it does not always reflect the actual cash moving in and out of your business.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">That\u2019s because net income usually follows accrual accounting, where revenue and expenses are recorded when they are earned or incurred, not necessarily when cash is received or paid.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">For example, if you make a sale on credit, the revenue may appear in net income before the customer has paid. Net income can also include non-cash expenses such as depreciation and amortization, which reduce profit without reducing cash.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">As a result, a business can look profitable on paper while still struggling to cover short-term bills.<\/p>\n\n\n\n<h3 id=\"h-accounting-methods-can-affect-net-income\" class=\"wp-block-heading\"><strong>Accounting methods can affect net income<\/strong><\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Net income is influenced by the accounting methods and assumptions your business uses.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">For example, the way you record depreciation, value inventory, or recognize revenue can change your reported net income. Inventory valuation methods, such as the <a href=\"https:\/\/www.sage.com\/en-us\/blog\/glossary\/what-is-fifo-method-in-accounting-and-why-is-it-important\/\">FIFO method<\/a>, can affect COGS, while revenue recognition policies determine when revenue is recorded.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><a href=\"https:\/\/www.sage.com\/en-us\/accounting-software\/revenue-recognition\/\">Revenue recognition software<\/a> can help businesses apply these policies more consistently, especially when contracts, billing schedules, or performance obligations are complex.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">This does not mean the figure is wrong, but it does mean net income should be reviewed in context.<\/p>\n\n\n\n<h3 id=\"h-one-time-events-can-distort-the-picture\" class=\"wp-block-heading\"><strong>One-time events can distort the picture<\/strong><\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Net income can also be affected by one-off events that don&#8217;t represent your business&#8217;s normal operations.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">For example, selling an asset may temporarily increase net income, while a restructuring charge may reduce net income. These events can make profitability look unusually high or low for a specific period.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">To understand ongoing performance, it can help to review net income alongside adjusted profit figures that separate recurring activity from one-time events.<\/p>\n\n\n\n<h3 id=\"h-net-income-may-not-reflect-every-future-cost\" class=\"wp-block-heading\">Net income may not reflect every future cost<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Net income only includes costs that have been recorded for the reporting period. Some potential costs, such as unresolved legal claims or future obligations, may not be included until they become more certain.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">This means a business may look more profitable than it would if those future costs were already known and recorded.<\/p>\n\n\n\n<h3 id=\"h-net-income-does-not-show-operational-efficiency-on-its-own\" class=\"wp-block-heading\">Net income does not show operational efficiency on its own<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Net income tells you the final profit after all expenses, but it does not explain how efficiently your core business is operating.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">To evaluate operational performance, review net income alongside metrics such as gross income, operating income, EBITDA, and cash flow.<\/p>\n\n\n\n<h2 id=\"h-take-control-of-your-finances-with-accurate-net-income-tracking\" class=\"wp-block-heading\">Take control of your finances with accurate net income tracking<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Calculating net income helps you understand whether your business is making money, managing costs, and staying on track with its financial goals.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">But tracking net income accurately across every reporting period can take time, especially when revenue, expenses, tax, and adjustments are spread across different systems.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Sage accounting software can help by automating calculations, tracking income and expenses, and generating financial statements, so you can maintain accurate financial records with less manual effort.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">With clearer financial data, you can make better decisions, monitor performance with confidence, and spend more time focusing on growth.<\/p>\n\n\n\n<h2 id=\"h-frequently-asked-questions-about-net-income-formula\" class=\"wp-block-heading\">Frequently asked questions about net income formula<\/h2>\n\n\n\n<div class=\"schema-faq wp-block-yoast-faq-block\"><div class=\"schema-faq-section\" id=\"faq-question-1785422356690\"><strong class=\"schema-faq-question\"><strong>Does net income include taxes?<\/strong><\/strong> <p class=\"schema-faq-answer\">Yes. The net income formula includes income tax along with the business&#8217;s other expenses.<\/p> <\/div> <div class=\"schema-faq-section\" id=\"faq-question-1785422370920\"><strong class=\"schema-faq-question\"><strong>Is net profit the same as net income?<\/strong><\/strong> <p class=\"schema-faq-answer\">Yes. &#8220;Net income&#8221; is the term most commonly used in financial statements, while &#8220;net profit&#8221; is often used in business discussions. In most cases, both terms refer to the same measure of profitability.<\/p> <\/div> <div class=\"schema-faq-section\" id=\"faq-question-1785422379128\"><strong class=\"schema-faq-question\"><strong>Can net income be negative?<\/strong><\/strong> <p class=\"schema-faq-answer\">Yes. A negative net income means your business&#8217;s total expenses exceeded its total revenue during the reporting period. This is commonly referred to as a net loss.<\/p> <\/div> <div class=\"schema-faq-section\" id=\"faq-question-1785422390440\"><strong class=\"schema-faq-question\"><strong>Are dividends deducted before calculating net income?<\/strong><\/strong> <p class=\"schema-faq-answer\">No. Dividends are paid from net income after it has been calculated. They reduce retained earnings but don&#8217;t affect the net income reported on the income statement.<\/p> <\/div> <\/div>\n\n\n\n<div class=\"single-cta\">\n\t<div class=\"single-cta__positioner on-scroll-highlight__target\">\n\t\t<div class=\"single-cta__wrapper has-dark-background-color\">\n\t\t\t<div class=\"single-cta__content\">\n\t\t\t\t\t\t\t\t<h2 class=\"single-cta__title h3\">Subscribe to our Sage Advice Newsletter<\/h2>\n\n\t\t\t\t\t\t\t\t\t<div class=\"single-cta__description\">\n\t\t\t\t\t\t<p>Get our latest business advice delivered directly to your inbox.<\/p>\n\t\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t<a\n\t\t\t\t\t\thref=\"#gate-ab515c6e-7e90-4c2f-a67e-113872516e8b\"\n\t\t\t\t\t\tclass=\"single-cta__button button button--primary\"\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t>Subscribe<\/a>\n\t\t\t\t\t\t\t<\/div>\n\n\t\t\t\t\t<\/div>\n\n\t\t\t\t\t<img decoding=\"async\" width=\"1440\" height=\"810\" src=\"https:\/\/www.sage.com\/en-us\/blog\/wp-content\/uploads\/sites\/2\/2022\/04\/GettyImages-1073797282-1440x810.jpg\" class=\"single-cta__image\" alt=\"Working from home with tea in hand\" loading=\"lazy\" srcset=\"https:\/\/www.sage.com\/en-us\/blog\/wp-content\/uploads\/sites\/2\/2022\/04\/GettyImages-1073797282-1440x810.jpg 1440w\" sizes=\"auto, (min-width: 48em) 33vw, 100vw\" \/>\t\t\t<\/div>\n<\/div>\n\n\n\n<p class=\"wp-block-paragraph\"><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Learn how to calculate Net Income (NI), including the formula to use, and discover how it can help you measure profitability, track financial performance, and make smarter business decisions.<\/p>\n","protected":false},"author":1774,"featured_media":20547,"menu_order":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_yoast_wpseo_is_cornerstone":"","_yoast_wpseo_meta-robots-noindex":"","_yoast_wpseo_meta-robots-nofollow":"","_yoast_wpseo_opengraph-title":"","_yoast_wpseo_opengraph-description":"","_yoast_wpseo_opengraph-image":"","_yoast_wpseo_opengraph-image-id":"","_yoast_wpseo_twitter-title":"","_yoast_wpseo_twitter-description":"","_yoast_wpseo_twitter-image":"","_yoast_wpseo_twitter-image-id":"","_yoast_wpseo_schema_page_type":"","_yoast_wpseo_schema_article_type":"","_sage_video":false,"_yoast_wpseo_focuskeywords":"[{\"keyword\":\"net income 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