In business, what term describes the financial gain after expenses are subtracted from revenues?

• A. Net income
• B. Gross margin
• C. Cash flow
• D. Break-even point

Answer: (A)

Net income is the amount left after subtracting all costs and expenses from revenue. It shows the business’s actual profitability and is often called the bottom line or net profit. This includes operating expenses, interest, taxes, depreciation, and amortization, not just the cost of goods sold. Gross margin, on the other hand, subtracts only the cost of goods sold from revenue and doesn’t account for all other expenses, so it doesn’t reflect overall profitability. Cash flow focuses on the timing of cash inflows and outflows and can differ from net income due to non-cash charges and when payments occur. The break-even point is where revenue just covers total expenses, resulting in zero profit, not the gain after all costs. So the term that describes the financial gain after expenses are subtracted from revenues is net income.