Which key metric is derived from the income statement to assess profitability?

Net income is the key metric derived from the income statement that is widely used to assess a company's profitability. It represents the total revenue a company earns minus all expenses, including operating costs, taxes, interest, and depreciation. This figure is crucial because it provides a comprehensive view of how much profit the company retains after all expenditures have been accounted for, making it an essential indicator for investors assessing a firm's profitability and potential for growth.

While total revenue indicates how much money a company brings in before any costs are deducted, it does not reflect profitability since it doesn't account for expenses. Operating profit, which measures earnings before interest and taxes (EBIT), provides insight into profitability from core operations but does not consider non-operating factors. Gross margin, while important as it shows the difference between sales and the cost of goods sold, focuses solely on production costs and does not account for operating or non-operating expenses. Therefore, net income stands out as the most comprehensive measure of profitability derived from the income statement.