1. What is Net Income?

Net Income, also known as net profit or bottom line, is a company's total earnings after subtracting all expenses from total revenue. It's a key indicator of a company's financial health and profitability.

2. How Does the Calculator Work?

The calculator uses the Net Income formula:

Where:

• \( Revenue \) — Total income from sales of goods/services
• \( COGS \) — Direct costs of producing goods sold
• \( OpEx \) — Operating expenses like rent, salaries, utilities
• \( Taxes \) — Income taxes owed

Explanation: The formula calculates what remains after all business expenses are deducted from total revenue.

3. Importance of Net Income Calculation

Details: Net income is crucial for assessing profitability, making investment decisions, securing loans, and determining dividend payments to shareholders.

4. Using the Calculator

Tips: Enter all amounts in dollars. Ensure expenses don't exceed revenue (unless calculating a net loss). Values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between gross profit and net income?
A: Gross profit is revenue minus COGS only, while net income subtracts all expenses including OpEx and taxes.

Q2: Can net income be negative?
A: Yes, negative net income indicates a net loss when expenses exceed revenue.

Q3: How often should net income be calculated?
A: Typically calculated quarterly and annually, but can be done monthly for internal tracking.

Q4: Does this include non-operating income/expenses?
A: This basic calculator focuses on operating activities. For comprehensive analysis, include items like interest and one-time gains/losses.

Q5: How does depreciation affect net income?
A: Depreciation is included in operating expenses, reducing taxable income and thus increasing net income.