What's what in finances: Net

The gain or loss on a security sale as measured by the selling price of a security less the adjusted cost of acquisition.

Net is the profit or loss on a transaction. For example, in the sale of an asset, one calculates the net by taking the sale price and subtracting the outlay for buying or producing the asset. If the net is positive, one has made a profit; if it is negative, one has suffered a loss.

It is a useful number for investors to assess how much revenue exceeds the expenses of an organization. This number appears on a company's income statement and is also an indicator of a company's profitability.

Business analysts often refer to net income as the bottom line since it is at the bottom of the income statement.

Net income, like other accounting measures, is susceptible to manipulation through such things as aggressive revenue recognition or hiding expenses. When basing an investment decision on the net income, investors should review the quality of the numbers used to arrive at the taxable income and net income.

A term related to Net is Return on investment.

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