How is net income defined in contrast to gross income?

Net income is defined as the income remaining after all expenses, taxes, and costs have been deducted from total revenue. In essence, it provides a complete representation of a company's financial performance over a certain period, indicating what the company has earned after all obligations have been settled.

On the other hand, gross income refers specifically to the revenue generated from sales before any expenses or costs are deducted, excluding taxes and other expenses. This distinction is significant as it highlights the difference between the broader measure of total income (or revenue) and the final profit available to shareholders after all costs have been accounted for.

In the context of financial analysis, distinguishing between these two helps stakeholders evaluate the profitability and operational efficiency of a business. Understanding this difference is crucial for interpreting an organization’s financial health accurately.