1. What is Net Income?

Net income, also known as net profit or bottom line, is the amount of money that remains after subtracting all expenses, taxes, and costs from total revenue. It represents the actual profit of a business or individual after all financial obligations have been met.

2. How Does the Calculator Work?

The calculator uses the fundamental net income formula:

Where:

• \( \text{Revenue} \) — Total income generated from sales, services, or other business activities (USD)
• \( \text{Expenses} \) — All costs incurred to generate revenue, including operating expenses, cost of goods sold, taxes, and other expenditures (USD)

Explanation: This simple calculation provides the fundamental measure of profitability for any business or financial activity.

3. Importance of Net Income Calculation

Details: Net income is a critical financial metric that indicates the overall profitability and financial health of a business. It helps investors, managers, and stakeholders assess performance, make investment decisions, and plan for future growth.

4. Using the Calculator

Tips: Enter revenue and expenses in USD. Both values must be positive numbers. The calculator will automatically compute the net income, which can be positive (profit) or negative (loss).

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between gross income and net income?
A: Gross income is revenue minus cost of goods sold, while net income is revenue minus all expenses including operating costs, taxes, and interest.

Q2: Can net income be negative?
A: Yes, when expenses exceed revenue, net income becomes negative, indicating a net loss for the period.

Q3: How often should net income be calculated?
A: Businesses typically calculate net income monthly, quarterly, and annually for financial reporting and analysis purposes.

Q4: What expenses are included in net income calculation?
A: All business expenses including salaries, rent, utilities, cost of goods sold, taxes, depreciation, and interest payments.

Q5: Why is net income important for investors?
A: Net income indicates a company's profitability and ability to generate returns for shareholders, influencing stock prices and dividend payments.