The net income formula is used to calculate the net earnings of the business. Net income is equal to the value of revenue generated minus expenses, interest, and taxes. It is applicable at different levels, from an individual to a group to an organization. Net income for a business is equal to the total revenue of the company minus the operating costs, business expenses, and tax. The net income formula tells us about the net income for an individual is equal to the personal gross income (total earnings before taxation) minus the deductions and tax. The net income formula is explained below along with the solved examples.
Formula for Net Income
The net income formula is the difference between the total revenue generated and the total expenses generated in the process. The formulas for the net income are listed below:
1) Net Income = Total Revenue - Total Expenses
Total revenue is the total amount generated by the sales of goods and services.
Total expenses are the cost of operations that any company or human experiences to generate revenue.
2) Net income = gross income -expenses
3) Net income = (revenue - the cost of goods sold) - expenses
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