Is Net Income The Same as Net Profit?

In business, the detailed calculation of indicators of revenue, income, and profit is very necessary. This helps businesses to accurately identify the market situation and the ability to effectively trade products and services. From there, make a decision about what businesses should do next to improve business results. The article below, Construction Cost Accounting shares with you useful information about Net Profit, Net Income.

What is Net Income?

Net Income, also called Net Profit or net earnings, is a concrete concept. Net Profit is the total revenue of a business after subtracting all costs constituting that product or service, including corporate tax. Net Income is an important indicator of financial statements. All businesses and companies are very interested in this index.

How to Calculate Net Income?

Formula of net income:

Net Income = Total Revenue - Total Expenses

In this formula:

1. Total Revenue: Basically, revenue is the entire money that the company has earned in a period of time. The money that comes from goods or services that the company sells can be checks, credit cards, or cash.

2. Total expenses: Expenses will include all of the money that you use to complete the product/service. It includes employee salaries, taxes, and office rent. It also includes more obscure accounts like product returns or any other type of negative transaction.

Read more: The Ultimate Guide to Managing Construction Overhead Expenses

What is Net Income for Investors & Businesses?

The value of profit after tax shows (Net Income) how much profit it accounts for in the total revenue of the business. It determines whether the company or the business enterprise makes a profit or incurs a loss. The larger the net profit after tax must be positive, the bigger the profit is. On the contrary, if this value is negative, the company will lose money and need to come up with a new business direction or strategy for the company or enterprise. Investors do not need to know what happened during the business operation. What they care about is the net profit earned.

Read more: Accounting: What does CPA stand for?

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