Net Income = Pre-Tax Net Income − Income Taxes
What the figure represents
Net income is the profit shown on the final line of the income statement. It is calculated by taking pre-tax net income — ordinary profit adjusted for extraordinary income and extraordinary losses — and deducting income taxes. It shows how much profit a company ultimately retained over the period.
Points to watch when reading it
Net income is also relevant to the funds available for dividends and to changes in retained earnings on the balance sheet. Rather than looking at a single year's figure alone, it can help to check the trend over multiple periods and whether extraordinary items are contributing to swings in the figure.