Net income calculation is a business measure used to track the overall profitability of an organization. It is determined by subtracting all of the expenses, such as costs of goods sold, salaries, taxes, and other costs from the total revenue gained from its operations. In effect, it helps determine how well a business is performing in terms of both efficiency and profitability. To understand net income at its core, imagine that you own a business and you have a certain amount of money coming in each month (your revenues), and then you have to pay out a certain amount of money to run the business (your expenses). The difference between those two figures is your net income: Your profits. When managed correctly, net income calculations help businesses ensure they’re running efficiently while maximizing their profits.