Net Income Formula

Formula to Calculate Net Income

Net Income formula is used for the calculation of the net income of the Company. It is the most important number for the Company, analysts, investors, and shareholders of the Company as it measures the profit earned by the Company over a period of time.

Net Income = Total Revenues – Total Expenses

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Source: Net Income Formula (wallstreetmojo.com)

Examples

You can download this Net Income Formula Excel Template here – Net Income Formula Excel Template

Example #1

Company ABC Inc. had revenue from the sale of $ 100,000 for the year 2017. It paid $ 20,000 as employee wages, $ 50,000 for raw materials and goods, $ 5,000 for other office and factory maintenance expenses. The Company had interest income of $ 3000 and paid $ 2500 in taxes. What is the net income of the Company ABC Inc.?

The Total revenue of the Company = Revenue from sale + Interest Income

  • Total revenue = 100000 + 3000 = 103,000

The Total expenses = Employee wages + raw materials + office and factory maintenance + interest income + taxes

  • Total expenses = 20000 + 50000 + 5000 + 3000 + 2500 = $ 80, 500

The Net Income = Total revenue – total expenses.

  • Net income = 103000 – 80500
  • Net income = $ 22,500

Example #2

Let us see the Profit and Loss statement of Apple and the net income reported by the Company.

Snapshots from the annual 10-K filing of the Company to SEC is as below. Calculation of net Income is done as the bottom lineBottom LineThe bottom line refers to the net earnings or profit a company generates from its business operations in a particular accounting period that appears at the end of the income statement. A company adopts strategies to reduce costs or raise income to improve its bottom line. read more of the profit and loss statement or the statement of operations. The net income of the Company is highlighted in yellow

Apple Net Income

source: Apple SEC filings

Net Income Calculator

You can use the following Net Income Calculator.

Total Revenues
Total Expenses
Net Income Formula
 

Net Income Formula = Total Revenues Total Expenses
0 0 = 0

Relevance and Uses

Net Income Formula in Excel (with excel template)

Let us have a look at another example of Net Income and try to solve it in excel.

A Company XYZ has a total revenue of $ 500,000, and the Cost of goods sold by the CompanyCost Of Goods Sold By The CompanyThe cost of goods sold (COGS) is the cumulative total of direct costs incurred for the goods or services sold, including direct expenses like raw material, direct labour cost and other direct costs. However, it excludes all the indirect expenses incurred by the company.read more are $ 120,000. The Company paid salaries and wages to its employees to the tune of $ 30,000. It spent $ 20,000 on rent and other utilities. The Company records $ 15,000 as a depreciation expense. The Company also pays interest on the long-term debt of $ 10,000 and pays taxes of $ 20,000.

The calculation of Net Income can be done simply by subtracting all the expenses from the revenue. The calculation of net income is shown in the below template.

NI formula Excel 1

In the below given excel template, we used the Net Income formula to calculate Net Income.

NI Excel 1.2

The Net Income of the Company will be –

Net income Excel 1.3

Net Income Formula Video

Recommended Articles –

This has been a guide to Net Income Formula. Here we learn how to calculate net Income using its formula along with some practical examples. Here we also provide you with Net Income Calculator with a downloadable excel template. You can learn more about Excel Modeling from the following articles –

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