What is the formula for calculating net income?

The formula for calculating net income is accurately represented by subtracting operating expenses (OpEx) and the cost of goods sold (COGS) from net sales. This approach provides the net income figure by accounting for the direct costs associated with producing goods and the broader expenses related to the operation of the business.

Net income is an essential indicator of a company's profitability, as it reflects how much money remains after all expenses have been deducted from revenue. This formula captures critical elements of business finances, illustrating the flow from sales down to profit.

The other options do not accurately define net income based on common accounting practices. For example, gross margin is a measure of sales revenue after deducting the cost of goods sold and does not account for operating expenses, which are crucial to arrive at the net income figure. Additionally, adding EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) to net sales does not provide a net income calculation; EBITDA itself is an intermediate metric that does not account for interest and tax expenses. Finally, cash flow minus total liabilities does not equate to net income, as cash flow focuses on liquidity rather than profitability, and liabilities are separate considerations in financial assessments.