Uses of Net Income - Management Duniya

Uses of Net Income

The most important purpose of net income reporting is that it provides useful information to those who are most interested in financial reports. It distinguishes between invested capital and income or between stocks and flows. The income is regarded as guide to a firm dividend and retention policy and is considered the basis for taxation and free distribution of wealth among individuals. A specific use of income is in the measurement of managerial efficiency decides which it is used as a means of regulated firms with a public interest. Income figures aid in the prediction of the dividend. Economists use this figures an evaluating the allocation of resources. Earnings per share is considered to be an important factor in investment decisions.

Capital and Income:

Irving Fisher described capital as a stock of wealth at an instant of time and income as a flow of service through time. Capital according to him is the embodiment of future services and income is the enjoyment of these services over a specific period of time.

Source: A/C Books & Notes

Tags: Capital, Capital Expenditure, Capital Market, daily income, expenses, income, Income and revenue, monthly expenses, Net, Net Income, of, Price, revenue, stocks, Uses, Uses of Net Income
By: Management Duniya