1. What is Net Income?

Net income is the total profit of a business after all expenses and taxes have been deducted from total revenue. It represents the actual earnings available to the company for reinvestment, distribution to shareholders, or retention.

2. How Does the Calculator Work?

The calculator uses the net income formula:

Where:

• \( Revenue \) — Total income from all sources (USD)
• \( Expenses \) — All operating and non-operating costs (USD)
• \( Taxes \) — All applicable taxes (USD)

Explanation: This fundamental accounting equation calculates the bottom line profit that remains after accounting for all business costs and tax obligations.

3. Importance of Net Income Calculation

Details: Net income is a key indicator of a company's financial health and profitability. It helps investors assess performance, guides business decisions, and determines tax liabilities.

4. Using the Calculator

Tips: Enter revenue, expenses, and taxes in USD. All values must be non-negative. The calculator will compute the net income automatically.

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 deducts all expenses and taxes from total revenue.

Q2: Can net income be negative?
A: Yes, when expenses and taxes exceed revenue, resulting in a net loss rather than profit.

Q3: What expenses should be included?
A: Include all business expenses: salaries, rent, utilities, supplies, marketing, depreciation, interest, and other operational costs.

Q4: How often should net income be calculated?
A: Typically calculated monthly for management purposes and quarterly/annually for financial reporting and tax purposes.

Q5: Why is net income important for investors?
A: It indicates company profitability, affects stock prices, and determines dividend payments and reinvestment capacity.