This glossary uses Visual Finance™ to bring financial terms to life. Each example shows data from the Round Number Company, a fictional business with simplified figures to make learning easier. For more details, visit 'How to Read Visual Finance'.
Net Income (in the US) or Net Profit (in the UK) is the Profit for the operating period.
Calculation: Sales less all Costs & Expenses
Return on Sales ratio: Net Income as a percentage of Sales
Example: The Round Number CompanySales = 200; COS = 80; OpEx = 72; Finance = 8; Tax = 10; the adjustments cancel out Net Income = 200 - 80 - 72 - 8 - 10 = 30 Return on Sales or Profitability = 30/200 = 30 % |
Net Income is the amount of Profit left for the owners, after all costs and expenses, including interest and taxes, have been paid.
Return on Sales is proportion of Profit to Sales, it is the Profitability of the business.
Net Income is also known as Net Profit or Earnings or Profit or the "Bottom Line".
Return on Sales is also known as Profitability or the Profitability Ratio.
The above is our generic explanations of common corporate financial terminology. Actual meanings can vary widely from company to company; in order to have the correct internal definition you need to ask your Finance Department, "What do you mean by that?"
term list.