It’s all well and good that you are in business, but I’m guessing you would want to know how much you actually make from running that business, right? Here’s where calculating your net income (subtracting all your expenses including taxes, interests and operational costs from your business’s revenues) would help.
For example…
Johnny runs a pizza shop name and being a proud Italian, he raves about how good his food is and how well his business is going. His wife is not so sure (about the business going well that is!) so she calculates the business’s net income. Expenses, taxes and interest add up to fifty thousand dollars. Revenue is a hundred thousand dollars. The net income is fifty thousand dollars, a neat profit indeed! Johnny doesn’t say “told you so”, he bakes her a nice pepperoni pizza instead.
