In accounting terminology, the term Net Income refers to what is left of the company’s revenue after the company has paid out all operating expenses and assumed all losses for the reporting period. Net Income is also often called the company’s the “bottom line”.
For example, after all expenses and other payments have been deducted from the revenues of the company, Net Income shows up as the lowest entry on the balance sheet, which is why Net Income is also known as the bottom line. The basic formula for net income consists of the following: Net Income or Net Loss = Total Revenues – Total Expenses. Depending on the accounting methods used, Net Income can fluctuate because of non-cash expenses such as depreciation and amortization. As a result, Net Income can vary considerably from company to company and from industry to industry. Many companies try to avoid paying out too much in taxes, so they purposely keep their Net Income low.