Net Income

Net Income - also referred to as ‘the bottom line’, ‘net profit’, or ‘net earnings’ - is computed as gross sales minus cost of goods sold, expenses and taxes for an accounting period.

After all of its KPI have been covered above, it is pretty much self-explanatory. However, you must always remember that net income is calculated on an accrual basis and by itself does not guarantee maximization of your free cash flows and the financial value of your company.

Unfortunately, it does not guarantee the liquidity of your company – or even solvency. There are plenty of examples when a perfectly profitable company is hopelessly broke. Therefore, efficient management of corporate profits is not enough; you must also develop and implement a highly efficient working capital management system. It will be covered in the next section of this guide – on your corporate balance sheet.