Net Income To Common

NET_INCOME_TO_COMMON is the net income or profit that is left for common shareholders. To calculate this net income, the costs of running the company are subtracted from the revenue (total money earned by selling) and then a special type of dividend known as preferred dividend is paid to a certain number of special shareholders. The remaining money is the net income or profit.

Example: suppose a company has a revenue of $10 million and the cost is $8 million. So, $2 million is the net profit. Then the company pays the preferred shareholders first, say, they get paid $0.1 million dollars as preferred dividends. Finally, we have $1.9 million left, which is the net income to common shareholders.

But this $1.9 million is not necessarily going to be distributed to the common shareholders. The company board of directors might decide to reinvest a portion of the money (say, $1 million) back into the company, and so the remaining $0.9 million or $900,000 will get distributed amongst the common shareholder. Say, the number of shares is 100,000, then each share will get a profit of $900,000 / 100,000 = $9 per share.

In fact, the earnings per share (EPS) for this example is the $1.9 million divided by the total 100,000 outstanding shares, hence $19 per share.