1. What is Net Income?

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

2. How Does the Calculator Work?

The calculator uses the basic net income formula:

Where:

• \( \text{Sales} \) — Total revenue from all sources
• \( \text{Costs} \) — All business expenses including operating costs, taxes, etc.

Explanation: This simple calculation shows how much money a business actually earns after accounting for all expenses.

3. Importance of Net Income Calculation

Details: Net income is crucial for assessing business profitability, making investment decisions, securing loans, and planning for growth. It's also used to calculate earnings per share (EPS) for publicly traded companies.

4. Using the Calculator

Tips: Enter total sales/revenue and total costs in dollars. Both values must be positive numbers. The calculator will display the net income (profit or loss).

5. Frequently Asked Questions (FAQ)

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

Q2: Can net income be negative?
A: Yes, negative net income indicates the business is operating at a loss (expenses exceed revenue).

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

Q4: What expenses are included in costs?
A: All business expenses including COGS, salaries, rent, utilities, taxes, insurance, marketing, etc.

Q5: Why is net income important for taxes?
A: Most businesses pay taxes based on net income, making accurate calculation essential for tax compliance.