What is Net Income?

Net income is defined as the total revenue minus total expenses. This financial metric reflects the profitability of a company during a specific period, typically reported at the end of a fiscal quarter or year. By subtracting all incurred expenses from total revenues, a business can ascertain the actual earnings that remain after covering all costs, including operating expenses, interest, taxes, and any other financial obligations. This measurement is critical for investors and analysts as it provides insight into the company’s financial health and operational efficiency.

In contrast, the other options do not accurately portray the definition of net income. Total expenses minus total assets does not relate to profitability; rather, it represents a balance sheet analysis but does not indicate the earnings generated. Total revenue plus gross profit incorrectly implies a different calculation that does not reflect net income at all. Lastly, while earnings distributed to stockholders pertains to dividends, this is a distribution of earnings, not a calculation of net income itself. Thus, the first choice clearly defines net income accurately in the context of financial reporting.