Final answer:
Net income is calculated by subtracting total expenses from total revenue in order to determine the profitability of a business.
Step-by-step explanation:
Total revenue is the income the firm generates from selling its products. We calculate it by multiplying the price of the product times the quantity of output sold:
Total Revenue = Price x Quantity
The formula for calculating net income is: Total Revenue minus Total Cost equals Net Income.
To calculate net income, you subtract the total expenses from the total revenue. This formula is used by businesses to determine their profitability.