Definition:

Net Income to Common Excluding Extraordinary Items (NI to Common Excl. Extraordinary Items) refers to the net income available to common shareholders after excluding any extraordinary items. Extraordinary items are unusual and infrequent gains or losses that are not expected to recur in the foreseeable future.

Examples

1. A company reports a net income of $5 million, but this includes a $1 million gain from the sale of a subsidiary, which is considered an extraordinary item. The NI to Common Excl. Extraordinary Items would be $4 million.
2. Another company has a net income of $10 million, including a $2 million loss from a natural disaster, which is an extraordinary item. The NI to Common Excl. Extraordinary Items would be $12 million.

Formula:

NI to Common Excl. Extraordinary Items = Net Income - Extraordinary Items

How to use the metric:

This metric is used by investors and analysts to assess a company's profitability from its regular operations, providing a clearer picture of its financial performance by excluding irregular and non-recurring items.

Limitations:

1. Determining what qualifies as an extraordinary item can be subjective and may vary between companies.
2. It may not fully capture the impact of extraordinary items on a company's long-term financial health.

Applies to:

This metric is applicable across various industries, especially those with the potential for extraordinary gains or losses, such as manufacturing, energy, and finance.

Doesn't apply to:

Industries with highly predictable and stable earnings, such as utilities, may find this metric less relevant since extraordinary items are less common.

Summary:

NI to Common Excl. Extraordinary Items provides a clearer view of a company's core profitability by excluding non-recurring extraordinary items. While useful for evaluating operational performance, it requires careful consideration of what constitutes an extraordinary item and may not fully reflect long-term financial impacts.