Annual Income

Written by True Tamplin, BSc, CEPF® | Reviewed by Editorial Team

Updated on January 05, 2023

Annual Income Definition

The term Gross Annual Income, or GAI, is the total income earned by an individual through their salary, wages, interest, and dividends within a given tax year.

Annual Income Meaning

Annual income may be used to either mean the total annual revenues minus total annual cost of goods sold for a company or the total annual salary, wages, interest, and dividends received by an individual within the tax-year.

Gross Annual income for companies is also known as Gross Profit and for individuals may be known as top-line income.

Annual Income Example

Any analysis of earnings begins with Gross Annual Income (GAI). In analyzing a company's earnings GAI will often be disaggregated into Gross Margin, which is GAI as a percentage of total revenue earned.

This figure is then useful for comparing against other companies with similar Market Capitalizations or similar industries.

For example, the performance of a company which makes $300 million in GAI and a company of smaller size which makes $30 million GAI in the same industry can be compared when you further derive the Gross Margin.

If the former has a margin of 10% whereas the latter has a margin 25%, investors may say the smaller company is relatively outperforming the former.

How to Find a Company’s Annual Income

For public companies, Gross Annual Income is presented in the first three lines of the income statement on their Form 10-k. It is important to remember that Gross Annual Income is calculated over a company's fiscal year which may be different than the calendar year.

Annual Income Analysis

If a company plans to experience significant costs of goods sold or significant revenues at the end of the year, they may be motivated to defer either until the beginning of the next year to control their GAI thereby managing investor expectations.

For this reason, financial analysts will often look at subsequent quarterly reporting to determine if the company is shifting significant transactions.

What Is Annual Income FAQs

What is Annual Income for an individual?

The term Gross Annual Income, or GAI, is the total income earned by an individual through their salary, wages, interest, and dividends within a given tax year.

What is Annual Income for a company?

Annual income for a company means the total annual revenues minus total annual cost of goods sold.

How can I find a company's Annual Income?

For public companies, Gross Annual Income is presented in the first three lines of the income statement on their Form 10-k.

What else can Annual Income determine?

In analyzing a company’s earnings, GAI will often be disaggregated into Gross Margin, which is GAI as a percentage of total revenue earned. This figure is useful for comparing against other much smaller or larger companies.

How can a company change their Annual Income?

If a company experiences significant costs of goods sold or revenue at the end of the year, they may choose to defer it until the beginning of the next year to control their GAI thereby managing investor expectations.

About the Author

True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website, view his author profile on Amazon, or check out his speaker profile on the CFA Institute website.

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