This Net Income Calculator can help determine whether your business is profitable or not. It's important to know if your business has a positive cashflow and how much remaining profit is left after subtracting all the expenses.

How to calculate the net income?

Let's go over the terms and definitions first:

Revenue: income that your business earns before any expenses

Cost of Sales: also known as (COGS), cost of the goods/services that are sold to your customers

Operating Expenses: costs to run your business operations, such as: rent, payroll, utilities, marketing, etc.

Interest: money to pay off a debt (if any)

Taxes: money that a government requires people to pay according to their income

Gross Profit: profit that a business makes after deducting the Cost of Sales

Operating Income: income that a business makes after deducting the Operating Expenses

Net Income: remaining income that a business makes after deducting all expenses such as operating expenses, interest, taxes, etc.

Steps to calculate net income

Example: Let's say Sandy's Coffee Shop earned a yearly revenue of $235,000. The cost of sales for the business is $32,000. The operating expense for the business is $75,000. The interest that the business must repay on it's business loan is $5,000 and the yearly tax that the business owe is $48,720.

Revenue = 235000

Cost of Sales = 32000

Operating Expenses = 75000

Interest = 5000

Tax = 48720

Gross Profit = Revenue - Cost of Sales

235000 - 32000 = 203000

Gross Profit = $203,000

Operating Income = Gross Profit - Operating Expenses

203000 - 75000 = 128000

Operating Income = $128,000

Net Income = Operating Income - Interest - Taxes

128000 - 5000 - 48720 = 74280

Net Income = $74,280

So the remaining profit for Sandy's Coffee Shop is $74,280