How is net income calculated on the income statement?

Net income is calculated on the income statement by taking total revenues and subtracting total expenses. This figure represents the profit a company earns during a specific period after all expenses, including cost of goods sold, operating expenses, interest, and taxes, have been deducted from revenues. This calculation is essential for assessing a company's profitability and providing insight into its financial performance.

The other options relate to different financial metrics: total assets minus total liabilities describes the company's equity, while total sales minus cost of goods sold indicates gross profit, which does not account for other operating expenses. Total cash inflows minus total cash outflows pertains to cash flow and is distinct from net income, which focuses specifically on profit derived from revenues after all expenses.