Question

Which of the following equations correctly describes how to calculate net income?
a.
net income = (cost of goods sold) - (net sales) - (operating expenses)
b.
net income = (operating expenses) - (cost of goods sold) - (net sales)
c.
net income = (operating expenses) + (cost of goods sold) - (net sales)
d.
net income = (net sales) - (cost of goods sold) - (operating expenses)

Answer 1

d. net income = (net sales) - (cost of goods sold) - (operating expenses)

Explanation: Net sales minus cost of goods sold equals gross profit; subtracting operating expenses yields net income.