Net Income

A company’s quarterly or annual balance sheet displays its net income. This is often the number a company reports to the general public as its earnings for the purpose of stock valuation and establishment of credit worthiness. According to Investing Answers, net income is what is left when you take a company’s total revenue and subtract taxes, operational costs, preferred stock dividends and interest paid.

Taxable Income

Companies want their reported income to be high to add value to stock and lend a general sense of security to the company’s current situation. Conversely, they want taxable income to be low because a low taxable income number requires them to pay less money in taxes. By looking at the income on which a company actually pays taxes, an analyst can judge the validity of reported income numbers.

Equations

References

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