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1.2: Net Income—A Critical Amount

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    The difference between the total revenue and total expense amounts for a particular period (such as a month or year), assuming revenue is higher, is profit. We will now refer to profit as net income. The following is a key calculation in determining a business’s operating results in dollars:

    Revenue - Expenses = Net Income

    Net income is determined by subtracting all expenses for a month (or year) from all revenue for that same month (or year). A net loss results if total expenses for a month (or year) exceed total revenue for the same period of time.

    Net income is a result that business people are extremely interested in knowing since it represents the results of a firm’s operations in a given period of time.

    This page titled 1.2: Net Income—A Critical Amount is shared under a CC BY-SA 4.0 license and was authored, remixed, and/or curated by Christine Jonick (GALILEO Open Learning Materials) via source content that was edited to the style and standards of the LibreTexts platform; a detailed edit history is available upon request.