What is net income?

Net income is defined as total revenue minus total expenses. This figure represents the profit a company makes during a specific period after deducting all of its expenses, which include operating expenses, interest, taxes, and any other costs incurred. It is often considered a key indicator of a company's financial performance and profitability.

This understanding is crucial because net income not only reflects the efficiency of a company in managing its operations but also provides insights into its ability to generate profit from its revenues.

The other choices do not accurately capture the essence of net income. Total revenue minus total liabilities pertains to a relationship that could indicate net worth but does not specifically denote profitability. Total assets minus total equity is related to calculating liabilities (the accounting equation), not net income. Lastly, total cash received refers to cash flow rather than profitability, as it does not take into account expenses incurred. Thus, the correct formulation of net income, highlighting the relationship between revenues and expenses, is vital for a thorough financial analysis.