Glossary definition

What is net income?

Net income

Net income is your company’s total profits after deducting all costs of operation. Costs of operations include business expenses such as inventory, insurance, salary payouts, leased or financed space, equipment costs, advertising, miscellaneous expenses—anything that you’ve paid in service of your business. Also included in the costs of operating a business are a depreciation, loss on investments, and taxes.

How to calculate net income:

Net Income = Total Revenue – (Expenses + Taxes)

The simple net income definition is your company’s net profits or net earnings. Commonly used to determine the profitability of individual sections or a business as a whole, factoring net income is an important evaluative measure for any business.

The 6 stages of smarter money management

Discover what successful business owners from all over the world do to win at small business finances during every stage of their journey.

Download Guide

Subscribe to the Sage Advice Blog

Get our latest business advice direct to your inbox.