Net Income After Taxes (NIAT)

What it is:

Net income after taxes (NIAT) is the number of sales dollars remaining after all operating expenses, interest, depreciation, taxes and preferred stock dividends have been deducted from a firm's total revenue

How it works (Example):

Net income after taxes is also referred to as the bottom line, profit or net earnings. The formula for NIAT is as follows:
#-ad_banner-#Total Revenue -Total Expenses = Net Income After Taxes

Net income after taxes is found on the last line of the income statement, which is why it's often referred to as the bottom line.  Let's look at a hypothetical income statement for Company XYZ:

Income Statement for Company XYZ, Inc.
for the year ended December 31, 2008

Total Revenue                        \$100,000

Cost of Goods Sold               (\$ 20,000)
Gross Profit                             \$ 80,000

Operating Expenses
Salaries               \$10,000
Rent                    \$10,000
Utilities                 \$  5,000
Depreciation        \$  5,000
Total Operating Expenses    (\$ 30,000)

Interest Expense                   (\$ 10,000)

Taxes                                       (\$ 10,000)

NIAT                                         \$ 30,000

By using the formula we can see that NIAT = \$100,000 - \$20,000 - \$30,000, - \$10,000 - \$10,000 = \$30,000

Why it Matters:

Net income after tax is one of the most closely followed numbers in finance, and it plays a large role in ratio analysis and financial statement analysis. Shareholders look at NIAT closely because it is the source of compensation to shareholders of the company, and if a company cannot generate enough profit to compensate owners, the value of shares will plummet. Conversely, if a company is healthy and growing, higher stock prices will reflect the increased availability of profits.

One of the most important concepts to understand is that NIAT is not a measure of how much cash a company earned during a given period. This is because the income statement includes a lot of non-cash expenses such as depreciation and amortization. To learn about how much cash a company generates, you need to examine the cash flow statement.