Next video:
Loading the player...

Net income and profit both deal with positive cash flow, but there are important differences between the two concepts.

Net income, also called net profit, is an income statement’s bottom line. It’s the figure that most comprehensively reflects a business’s profitability.

Net income accounts for every dime that flows in and out of a company. It includes expenses for product manufacturing, operations, debt payments and other obligations, as well as additional income streams from subsidiary holdings, asset sales, and other considerations.

Profit is the revenue that remains after expenses are paid, and it can refer to a number of figures at a number of levels. For example, gross profit is revenue less the cost of goods sold. Operating profit is revenue minus the cost of goods sold and operating expenses.

Companies calculate profit at different stages to see which expenses take the biggest bite out of the bottom line.

  1. No results found.
Related Articles
  1. Investing

    Gross, Operating and Net Profit Margins

    A company’s income statement includes the company’s gross, operating and net profits.
  2. Investing

    Understanding Profit Metrics: Gross, Operating and Net Profits

    Rather than relying solely on a company's net profit figures, seasoned investors will often look at gross profit and operating profit as well.
  3. Investing

    Understanding the Income Statement

    The best way to analyze a company - and figure out if it's worth investing in - is to know how to dissect its income statement. Here's how to do it.
  4. Investing

    Profitability Indicator Ratios

    Learn about profit margin analysis, effective tax rate, return on assets, return on equity and return on capital employed.
  5. Investing

    Cash Flow Statement: Reviewing The Cash Flow From Operations

    Discover why cash flow from operating activities is significant to businesses, and learn the direct and indirect methods for calculating it.
  6. Investing

    The Essentials Of Corporate Cash Flow

    Tune out the accounting noise and see whether a company is generating the stuff it needs to sustain itself.
  7. Investing

    Analyzing Operating Margins

    Learn how to analyze operating margins and how to put this aspect of equity analysis to work.
  8. Investing

    Operating Cash Flow: Better Than Net Income?

    Differences between accrual accounting and cash flows show why net income is easier to manipulate.
  9. Tech

    Cash Flow Is King: How to Keep it Running

    Why is cash flow so important, and what steps can a business take to improve it?
Hot Definitions
  1. Perfect Competition

    Pure or perfect competition is a theoretical market structure in which a number of criteria such as perfect information and ...
  2. Compound Interest

    Compound Interest is interest calculated on the initial principal and also on the accumulated interest of previous periods ...
  3. Income Statement

    A financial statement that measures a company's financial performance over a specific accounting period. Financial performance ...
  4. Leverage Ratio

    A leverage ratio is any one of several financial measurements that look at how much capital comes in the form of debt, or ...
  5. Annuity

    An annuity is a financial product that pays out a fixed stream of payments to an individual, primarily used as an income ...
  6. Restricted Stock Unit - RSU

    A restricted stock unit is a compensation issued by an employer to an employee in the form of company stock.
Trading Center