What is net income?

Utility is the interest or benefit one derives from something. The concept comes from the Latin utilĭtas, which means “quality of usefulness”. Specifically, we can add that it is composed of the following parts: “uti”, which is synonymous with “being able to be used”; “-Ilis”, which is indicative of “possibility” and the suffix “-dad”, which is equivalent to “quality”. This term is widely used in the field of economics and finance to describe the profit obtained from an asset or investment.

This means that if a person invests $1,000 in buying clothes that he later resells for a total of $1,500, he will make a profit of $500 on the trade.

Net , on the other hand, is an adjective used to refer to a resultant and clean quantity (in the sense of being well defined). In addition to the above, we can see that this is a word that has its etymological origin in French. Thus we find that it emanates from the word “hammock,” which can be translated “spotless, clean.” Net profit, then, is the profit obtained after applying the corresponding discounts. It is the concrete utility, which the subject or the company receives in hands. For example: a company performs the monthly balance sheet with a record that indicates revenue of 100,000 pesos. That money actually went into the company’s coffers, but that doesn’t mean it’s all profit. The company also has expenses to bear, such as paying taxes, purchasing raw materials, etc. Net revenue will be the amount resulting from subtracting these expenses from revenue. If the entity had expenses of 60,000 pesos, the net profit for the period was 40,000 pesos (the 100,000 pesos of income minus the 60,000 pesos of expenses). This allows us to infer that a company can increase its net profit without the need to increase its revenue, as it would also do so if it managed to cut its expenses. Sometimes net profit is often confused with gross profit, but it should be clear that they are different. Thus, this could establish that it is the one obtained by subtracting from the revenue of a company with the sale of goods and services what would be the money it costs to produce them. Said gross profit also does not make use of general expenses or financial costs, such as interest payments on debts or taxes. Both types of utility are important to establish that they can be vital when determining the success of a company in question. Likewise, they are also used to show the vulnerability of any entity. Specifically, when we speak of vulnerability, we are referring to the capacity that it may have to be able to face each and every one of the effects, adverse or not, that may occur at a given time and among which would be situations. 🇧🇷

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