Net Profit/Income

The Net Profit is the difference between the Operating profit , Taxes, and the interest. It is also known as the net income (NI) or the "bottom line" since NI is listed at the bottom of the income statement.

Net income is calculated by starting with a company's total revenue. From this, the cost of sales, along with any other expenses that the company incurred during the period, is removed to reach earnings before tax. Tax is deducted from this amount to reach the net income number.

EXAMPLE

Mary's gross income is $50,000 and she has $18,000 in deductions and credits. This leaves her with a taxable income of $32,000. Another $4,000 of income tax is subtracted; then the remaining $28,000 will be her net income.