What does net income refer to?

Net income refers to the amount of money that remains after all expenses have been deducted from total revenue. This figure reflects the actual profit that a business or individual retains after accounting for operating costs, taxes, and any other expenses incurred during a particular period. Understanding net income is crucial for appraisers as it provides insight into the profitability and financial health of an investment, property, or business.

The concept of net income is distinct from gross income, which only considers the total income before any deductions are made. Therefore, while gross income indicates the overall earning potential, net income gives a clearer picture of what is actually available to the owner after obligations are met.

Additionally, total income includes all sources of revenue, while projected income is an estimation for future earnings, neither of which aligns with the definition of net income. Thus, identifying net income as income after expenses offers a precise understanding of its role in financial assessment and reporting.