Net income is the income of the company post deduction of cost of goods sold, operational expenses, interest expense and taxes. It is the income that the company gets to retain from its revenue.
Net Income = Revenue – COGS – Operating Expenses – Interest Payment – Taxes
When ROR of a company increases, it means that the company is making more for what it is earning as revenues, which implies that it is cutting down on its expenses. On the other hand, when ROR decreases, it signals that the company is incurring more expenses and thereby making lesser profits.
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