1. What is Net Income?

Net Income represents the profit or loss of a business after deducting all expenses from total revenue. It's a key indicator of financial performance and profitability.

2. How Does the Formula Work?

The calculator uses the fundamental net income formula:

Where:

• \( \text{Revenue} \) — Total income generated from business operations (USD)
• \( \text{Expenses} \) — All costs incurred in running the business (USD)

Explanation: Positive result indicates profit, negative result indicates loss. This is the bottom line that shows the company's overall financial performance.

3. Importance of Net Income Calculation

Details: Net income is crucial for assessing business viability, making investment decisions, securing loans, and determining tax obligations. It's a primary measure of financial health.

4. Using the Calculator

Tips: Enter revenue and expenses in USD. Both values must be non-negative. The calculator will automatically determine if the result is 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 only, while net income deducts all operating and non-operating expenses.

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

Q3: What types of expenses are included?
A: All business expenses including salaries, rent, utilities, materials, taxes, interest, and depreciation.

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

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