net earnings
Net earnings, also called net income, is the gross earnings minus mandatory withholdings and deductions, such as state and federal income tax and social security contributions. For a business, net earnings are calculated as sales minus cost of goods sold, general expenses, operating expenses, depreciation, interest, taxes and other expenses. Interest on debt is also a kind of deduction that should be made in counting the net earnings.
Net earnings are important in business management, as it is the profit of a business that is attributable to shareholders. For a publicly traded company in the United States, the company’s net earnings must be disclosed in its annual 10-K filing with the Securities and Exchange Commission.
[Last reviewed in February of 2026 by the Wex Definitions Team]
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