Net Income (or Net Loss)

Also known as earnings or profit, net income is what it's really all about: making money. Thus, net income is probably the most closely watched item in a company's financial reports. Unfortunately, net income is subject to a good many judgments by both corporate managers and accountants, as well as various charges that exist largely on paper. Net income can also be swollen by earnings from discontinued operations, meaning net will be much lower next year. Because of the many issues surrounding net income, many investors prefer to focus on other measures of profit that remove some of the smoke and confusion generated by taxes, depreciation and other factors. Some like to look at cash flow or earnings before interest and taxes, and some even like to look at sales.



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