Net Income vs. Profit: An Overview

Net income, also called “net profit” or “net earnings,” is usually the last line item on a company’s 澳洲幸运5官方开奖结果体彩网:income statement. It represents the amount of money earned after taking into consideration all costs and expenses, such as operating costs, interest expenses, and taxes. A cost is generally a one-time payment, while an expense is usually recurring.

Profit on its own is the amount of revenue left after costs and expenses. It can be reported at different levels, such as 澳洲幸运5官方开奖结果体彩网:gross profit and 澳洲幸运5官方开奖结果体彩网:operating profit, depending ༒on which items are deductedܫ from the gross revenue.

Net Income

A company’s net income is the result of many calculations, beginning with revenue and encompassing all costs, expenses, and income streams for a given period. The sum of income less all costs and expenses is the net income. When spending exceeds the budgeted revenue, it causes a 澳洲幸运5官方开奖结果体彩网:revenue deficit.

Net income takes into account the price tags for manufacturing products, 澳洲幸运5官方开奖结果体彩网:operating expenses, interest paid on loans or accrued from investments, 澳洲幸运5官方开奖结果体彩网:depreciation and 澳洲幸运5官方开奖结果体彩网:amortization of assets, taxes, and even one-time payments for unusual events. It also includes additional income streams from subsidiary holdings or the sale of assets. Net income is the figure that most comprehensively reflects a business’ profitability and is used by publicly traded companies to calculate their 澳洲幸运5官方开奖结果体彩网:earnings per share (EPS).

As with other accounting measures, net income is susceptible to manipulation through suc🌃h techniques as aggressive revenue recognition or hiding expenses. When basing an investment decision or evaluation on it, investors and analysts review the quality of the numbers that were used to arrive at it, as well as at the business’ taxable inಞcome.

Profit

While net income is synonymous with a specific figure, profit can refer to many figures depending on which costs and expenses have been deducted. Cor𒈔porate accountants calculate it at different stages, because doing so allows companies to see whꦡere the biggest bites out of the bottom line are being taken.

For example, gross profit, also called “gross margin” or “gross income,” is revenue less a specific expenditure: the cost of goods sold (COGS), while operating profit refers to revenue minus the COGS and operating expenses. All the expenditures, both fixed and va⛎riable, necessary to keep the business running must be included.

Much of business performance is based on profitability in its various forms. Some analysts are interested in top-line profitability, whereas others are interested in profitability before certain specific expenditures, such as taxes𒁏 and interest. Others are only concerned with profitability after all costs and expenses have been paid.

Net Income vs. Profit Example

To illustrate the difference between net income and profit, let’s take a look at Apple’s annual income statement for fiscal year 2023. Its gross profit (listed as gross margin)—revenues minus COGS—is reported as just over $169 billion. Its net income—which includes operating expenses and income tax payments—is listed as just under $97 billion. Net profit is almost always going to be lower than gross profit.

The Bottom Line

While net income and profit are similar terms, there are distinct differences between the two. Pro𝄹fit can come in different shapes and sizes, such as gross profit and operating profit, and may not take into consideration all the costs and expenses a business has incurred.

Net income, on the other hand, is generally the last item on a company’s income statement. it represents how much revenue is left after all costs and expenses have been deducted, including COGS, administrative expenses, research and d𓂃evelopment, and taxes.