Editing Net income (section)

==An equation for net income==
Net profit: To calculate net profit for a venture (such as a company, division, or project), subtract all costs, including a fair share of total corporate overheads, from the gross revenues or turnover.<ref>{{cite web |title=Gross Profit vs. Net Income: What's the Difference? |url=https://www.investopedia.com/ask/answers/101314/what-are-differences-between-gross-profit-and-net-income.asp |publisher=Investopedia}}</ref>

<math>\text{Net Profit} = \text{Sales Revenue} - \text{Total Costs}</math>

A detailed example of a net income calculation:

<math>\text{Net Income} = \text{Gross Profit} - \text{Operating Expenses} - \text{Other Business Expenses} - \text{Taxes} - \text{Interest on Debt} + \text{Other Income}</math>

Net profit is a measure of the fundamental profitability of the venture. "It is the revenues of the activity less the costs of the activity. The main complication is . . . when needs to be allocated" across ventures. "Almost by definition, overheads are costs that cannot be directly tied to any specific" project, product, or division. "The classic example would be the cost of headquarters staff." "Although it is theoretically possible to calculate profits for any sub-(venture), such as a product or region, often the calculations are rendered suspect by the need to allocate overhead costs." Because overhead costs generally do not come in neat packages, their allocation across ventures is not an exact science.<ref name="Marketing_Metrics2">Farris, Paul W.; Neil T. Bendle; Phillip E. Pfeifer; David J. Reibstein (2010). ''Marketing Metrics: The Definitive Guide to Measuring Marketing Performance.'' Upper Saddle River, New Jersey: Pearson Education, Inc. {{ISBN|0137058292}}. Content from this book used in this article has been licensed for modification and reuse under the Creative Commons Attribute Share Alike 3.0 and Gnu Free Documentation licenses. See talk. The [[Marketing Accountability Standards Board (MASB)]] endorses the definitions, purposes, and constructs of classes of measures that appear in ''Marketing Metrics'' as part of its ongoing [http://www.commonlanguage.wikispaces.net/ Common Language in Marketing Project].</ref>

=== Example ===
Net profit on a P & L (profit and loss) account:

# [[Sales revenue]] = price (of product) × quantity sold
# [[Gross profit]] = sales revenue − cost of sales and other direct costs
# Operating profit  = gross profit − overheads and other indirect costs
# [[Earnings before interest and taxes|EBIT]] (earnings before interest and taxes) = operating profit + interest income + other non-operating income
# [[Earnings before taxes|EBT]] (Pretax profit, earnings before taxes) = EBIT − interest expenses − other non-operating expenses
# Net profit = EBT − tax
# [[Retained earnings]] = Net profit − dividends

Another equation to calculate net income:

[[Net sales]] (revenue) - [[Cost of goods sold]] = [[Gross profit]] - [[SG&A]] expenses (combined costs of operating the company) - [[Research and development]] (R&D) = [[Earnings before interest, taxes, depreciation and amortization]] (EBITDA) - [[Depreciation]] and [[amortization (accounting)|amortization]] = [[Earnings before interest and taxes]] (EBIT) - [[Interest expense]] (cost of borrowing money) = [[Earnings before taxes]] (EBT) - [[Tax expense]] = Net income (EAT)