What is the formula for calculating net income?

Net income is a fundamental concept in financial accounting, representing the profit a company earns after all expenses are subtracted from total revenue. The correct formula for calculating net income is total revenue minus total expenses. This reflects the net effect of all income generated from selling goods or services after accounting for the costs incurred in generating that income.

Understanding this formula is essential, as net income is a key indicator of a company's financial health and profitability. It helps stakeholders, including investors and management, assess the performance of the business over a specific period.

The other options misrepresent how net income is derived; adding total revenues and expenses would not provide a meaningful financial metric, multiplying them would incorrectly suggest a relationship that does not exist, and dividing total revenue by total expenses does not yield any relevant information about profitability. Thus, the subtraction of total expenses from total revenue is the accurate approach to calculating net income.