Net Income After Taxes (NIAT)

What Is Net Income After Taxes?

Net income after taxes (NIAT) is a financial term used to depict a company's profit after all taxes have been paid. Net income after taxes is an accounting term and is most frequently found in a company's quarterly and annual financial reports. Net income after taxes addresses the profit or earnings after all expense have been deducted from revenue. Net income after taxes calculation can be displayed as both a total dollar amount and a per-share calculation.

Figuring out Net Income After Taxes (NIAT)

Net income after taxes (NIAT) is the net income of a business less all taxes. At the end of the day, NIAT is the sum of all revenues generated from the sale of the company's products and services minus the costs to run it. Revenue and sales are sometimes utilized reciprocally by companies. Likewise, retail companies frequently utilize the term net revenue or net sales, on the grounds that they frequently have returned merchandise by customers. The total amount of rebates to customers from returns is deducted from the revenue total for the period.

No matter what the term utilized by a company to depict its total revenue earned from sales, revenue is constantly situated at the highest point of the income statement. Subsequently, revenue is the figure that all costs and expenses are deducted from that at last prompts net income, which rests at the lower part of the income statement. For this reason revenue is referred to as the top line, while net income is called the bottom line.

Net income after taxes is calculated by taking revenue and deducting a company's all's expenses and costs, including the accompanying:

Cost of goods sold, which addresses the costs engaged with production including direct labor and direct materials or stock
Depreciation, which is the method involved with expensing or spreading out the cost of fixed assets over their valuable life
Charge-offs, which can be one-time discounts or misfortunes
Interest expense on any debt including short-term debt and the interest portion for that period for long-term debt, for example, bonds gave
Taxes paid to the public authority
Overhead costs, which incorporate the staff and building for the corporate office are listed on the income statement as selling, general, and administrative (SG&A)
Research and development spending

Albeit net income after taxes is basically equivalent to net income, it is utilized in financial statements to separate between income before taxes and income after taxes. The two figures can likewise be portrayed as pre-tax income and after-tax income.

Deciphering Net Income After Taxes

Net income after taxes is one of the most dissected figures on a company's financial statements. The amount recorded gives an indication of the profitability of a company, which determines whether the firm can remunerate its investors and shareholders through dividends and share buybacks. Dividends are rewards-for the most part in cash-paid to shareholders while buybacks are share repurchases by a company.

An increase in profits over different periods ordinarily prompts an increase in the company's stock price since investors would have a good perspective on the business. As a company generates extra net income, they have more cash to invest in the company's future, which can incorporate purchasing new equipment, advances, or growing their operations and sales. A company with positive net income growth is likewise in a better financial position to pay down debt or make a acquisition to support their seriousness and total revenue.

A company with a net income figure that is negative or below average can be the consequence of a firm experiencing a decline in sales, poor expense management, obsolete advancements, exorbitant debt, or a poorly executed management strategy.

A company with negative net income-or misfortunes can likewise be on the grounds that it's a start-up firm, which might see a long time before the company makes money. Rather than watching net income, investors monitor revenue growth to determine assuming that the company can possibly at last be profitable.

A flood in a company's net income after taxes can be due to a lower tax rate or good tax treatment. Investors should crosscheck increases in NIAT with pre-tax income to guarantee that the extra profit is due to increases in revenue and not only a tax windfall.

Special Considerations

Net income after taxes isn't the total cash earned by a company over a given period, since [non-cash expenses](/noncashcharge, for example, depreciation and amortization are deducted from revenue to get the NIAT. All things considered, the cash flow statement is the reference to how much cash a company generates over a period.

While the net income after taxes calculation is one of the most strong measures of a company's performance, various accounting embarrassments over the course of the years have proven it to be under 100% dependable. It's important to note that net income is a significant measurement to use to assess a company's profitability. In any case, a company's reported financial numbers are just basically as dependable as the company behind them.

While looking at the net income of different companies, investors can utilize different financial metrics or ratios. A well known profitability ratio is called profit margin, which is NIAT as a percentage of total revenue of a company. The profit margin measures how much out of each and every dollar of sales a company generates as profit. For instance, a company that generates $1 million in revenue and $200,000 in profit would have a 20% profit margin ($200,000/$1,000,000 = .20 *100 to change over .20 to a percent). At the end of the day, for every dollar of revenue generated from sales, the company procures $0.20 in profits. Profitability analysis can assist investors with determining on the off chance that a company's net income is great when compared to different companies.

Real World Example of Net Income After Taxes

Below is the income statement for Apple Inc. (AAPL) for the fiscal quarter ending December 28, 2019, as per the company's 10-Q filing.

Close to the lower part of the statement (featured in blue) is Apple's pre-tax income, which was $25.9 billion for the quarter ending December 2019.
The income tax deduction (featured in red) shows that Apple paid $3.6 billion in taxes for the quarter.
Net income (featured in green) was $22.2 billion for the quarter.
All in all, Apple posted $22.2 billion in net income after taxes in December 2019, which was an increase from $19.9 billion in NIAT from one year sooner.

Features

Companies that increase net income have more cash to invest in the company's future, pay dividends, and buyback stock.
Net income after taxes addresses the profit or earnings after all expense have been deducted from revenue.
Net income after taxes (NIAT) is a financial term used to portray a company's profit after all taxes have been paid.