Net Income Formula is a measure of a business’s financial performance during a period. The formula is calculated by subtracting all expenses, including taxes, from total revenue for the period. This number provides an accurate picture of a company’s profitability and can be used to assess overall financial health over time. For example, if a business has $2 million in revenue and $1.5 million in expenses, its net income formula would be $500,000: 2 million – 1.5 million = 500,000. Knowing how net income changes over time can give managers insight into their operations and make better decisions about how to invest resources.