Computing net income is the process of calculating a company’s financial performance for a given period. In essence, it’s the difference between how much money a business earns and how much it spends over that period.
To calculate net income, you first subtract all expenses from total revenue to get gross profit. You then subtract all taxes, interest, and other costs from the gross profit, which gives you the net income figure. Net income is an essential part of any business’ financial analysis, as it can be used to benchmark future performance and show a company’s overall profitability.