Net income from continuing operations definition
/What is Net Income from Continuing Operations?
Net income from continuing operations is a line item on the income statement that notes the after-tax earnings that a business has generated from its operational activities. Since one-time events and the results of discontinued operations are excluded, this measure is considered to be a prime indicator of the financial health of a firm’s core activities.
Presentation of Net Income from Continuing Operations
The net income from continuing operations usually appears on the income statement of a larger business with more complex operations. In the following exhibit, we show the bottom part of an income statement for a business that has decided to set aside the financial results of its discontinued operations, and so wants to show its net income from continuing operations above the results associated with its discontinued operations.
Example of Net Income from Continuing Operations
Abigail Manufacturing reports the following figures for the year:
Revenue from continuing operations: $5,000,000
Cost of goods sold: $2,000,000
Operating expenses: $1,200,000
Interest expense: $100,000
Income tax expense: $300,000
Its calculation of net income from continuing operations is as follows:
Revenue – COGS – Operating expenses – Interest – Taxes = Net income from continuing operations
$5,000,000 revenue – $2,000,000 COGS – $1,200,000 Operating expenses
– $100,000 Interest expense – $300,000 Income tax expense
= $1,400,000 Net income from continuing operations