The formula for calculating net income, especially in a business context, is relatively straightforward. It can be expressed as:
Net Income = Total Revenue − Total Expenses
Where:
Total Revenue is the total amount of money earned by the business, typically from sales of goods or services, before any deductions.
Total Expenses include all costs and expenses associated with operating the business. This can include the cost of goods sold, operating expenses (like rent, utilities, salaries), taxes, interest on debts, and other operational costs.
In essence, net income is the amount of money that remains after all operating expenses, taxes, interest, and other costs have been subtracted from total revenue. It's an important measure of a company's profitability.