How to Calculate Net Income

Definition: Net income is the amount of income a corporation earned after adjusting for the cost of doing business, interest, depreciation and other expenses.

Formula:
Net income = Net Sales - Expenses
Or: = Net Revenue - Total Expenses

Example 1:
Calculate the net income for Company PPC, given the following information:
Sales revenue $88,000
Sales returns $8,000
Cost of goods sold $25,000
Depreciation of vehicles $5,000
Salaries $22,000
Electricity $1,200
Interest expense $1,000
Tax expense $2,000

Solution:
Net Sales = Sales revenue - Sales returns = 88,000 - 8,000 = $80,000
Net income = 80,000 - 25,000 - 5,000 - 22,000 - 1,200 - 1,000 - 2,000 = $23,800

Example 2:
CPM Ltd. has the following data:
Net revenue $100,000
Cost of goods sold $45,000
Selling, General and Administrative Expenses $50,000
Depreciation $15,000
Interest expense $2,100
Tax $1,000

Then,
Net income / loss = 100,000 - 45,000 - 50,000 - 15,000 - 2,100 - 1,000 = - $13,100 (net loss)
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