From total revenue and total expenses, compute the net income (profit) for a business or individual.
Input Data
Results
At a glance:Net income is total revenue minus total expenses, representing the bottom-line profit (or loss) for the period.
Formula
netIncome = totalRevenue − totalExpenses
$$\text{Net Income} = \text{Total Revenue} - \text{Total Expenses}$$$$\text{Net Profit Margin} = \dfrac{\text{Net Income}}{\text{Total Revenue}} \times 100\%$$How to Use
- Enter the total revenue.
- Enter the total expenses.
- Read the net income.
FAQ
Is net income the same as the cash a company actually earns?
No. Net income is an accounting profit under the accrual basis, reflecting 'how much was earned'; but credit sales not yet collected and non-cash items such as depreciation make net income differ from actual cash flow. A company showing net income on paper can still be cash-strapped. To see the cash position you need the cash flow statement as well — the two are complementary.
What items should total expenses include?
It should cover all outlays: cost of goods sold, operating expenses (rent, payroll, marketing, utilities), depreciation and amortisation, interest expense, and income tax. Leaving out any item — especially the often-overlooked tax and interest — will overstate net income. Deducting only the cost of goods sold gives gross profit; deducting operating expenses further gives operating profit; only after deducting everything do you arrive at net income.
What metrics can net income be used to compute?
Net income underpins many profitability measures: divide by revenue to get the net profit margin (how much profit per dollar of sales), divide by shares outstanding to get earnings per share (EPS), and divide by shareholders' equity to get ROE. For personal finance, plugging income minus expenses into the same formula gives your period savings — the starting point for budgeting and assessing financial health.
How is profits tax calculated on a Hong Kong company's net income?
A Hong Kong limited company pays profits tax on its assessable profits under the current two-tiered regime: the first HK$2,000,000 of assessable profits is taxed at 8.25%, and the portion above that at 16.5%. The tax is levied on 'assessable profits' computed after deductible expenses. Note that accounting net income and tax assessable profits may differ (some accounting expenses are not deductible, and some items have tax adjustments), so the actual tax should follow the Inland Revenue Department (IRD) assessment.
What is the difference between gross profit, operating profit, and net income?
These are the three layers of profit down the income statement: gross profit = revenue − cost of goods sold (only direct costs); operating profit = gross profit − operating expenses (rent, payroll, marketing and other core-business costs); net income = operating profit − interest − tax (the final profit after financing and tax costs). Breaking it down layer by layer shows where profit is being eroded — for instance, high gross profit but low net income usually means operating expenses, interest or tax are too heavy.
References
Content review: Calculatorism Finance Team. Results are for reference only; please refer to the relevant authorities for the official figures.