What is the formula for determining net income?

What is the formula for determining net income?

• A. Net income = Income - Cost of goods sold - Expenses
• B. Net income = Income x Cost of goods sold x Expenses
• C. Net income = Income - Cost of goods sold - Revenue
• D. Net income = Income - Revenue - Expenses

Answer: (A)

Net income shows profitability after all costs are subtracted from revenue. The standard formula is revenue minus the cost of goods sold minus expenses. In this context, income is being treated as revenue, so subtracting the direct production cost (cost of goods sold) and all other costs (expenses) gives the actual profit left. The other forms aren’t correct because they either multiply terms or subtract revenue from income, which isn’t how profitability is calculated.

Net income shows profitability after all costs are subtracted from revenue. The standard formula is revenue minus the cost of goods sold minus expenses. In this context, income is being treated as revenue, so subtracting the direct production cost (cost of goods sold) and all other costs (expenses) gives the actual profit left. The other forms aren’t correct because they either multiply terms or subtract revenue from income, which isn’t how profitability is calculated.