Net Income (NEAT)
Net Income is a way of measuring how much money is truly left over from a business or project after you subtract all the costs of running it. "Operating profit" is the money you have left from sales after paying the day-to-day costs of doing business (like wages, materials, and rent). From that operating profit, this formula then subtracts two more things: taxes (money owed to the government) and interest (the cost of any money the business has borrowed).
To calculate it in words: start with your operating profit, take away the taxes you owe, and then take away the interest you pay on loans. Whatever is left is your net income — the genuine bottom-line profit.
Reading the result is straightforward: a higher net income means the business or project is keeping more real money after all its obligations, which is good. A low or negative net income means costs, taxes, and interest are eating up nearly everything (or more than everything) the business earns.
A project manager looks at this when deciding whether a project is financially worth pursuing. If a project's net income is strong, it is generating real value; if it's weak, leadership may pause, adjust, or cancel it.
Think of it like your take-home pay. Your salary is like operating profit, but you don't get to keep all of it — the government takes taxes and your loan payments take interest. What finally lands in your bank account to spend is your net income.
Imagine a small software project earns an operating profit of $100,000 for the year. The business owes $20,000 in taxes and pays $10,000 in interest on a loan it took to fund the work. Net Income = $100,000 − $20,000 − $10,000 = $70,000. This tells the project manager that, after every real cost is accounted for, the project put $70,000 of actual profit into the company's pocket.
Every PMP formula explained free — plus worked examples and practice in PMP Math, and full timed mocks in the simulator.