Certified Paraoptometric (CPO) Practice Exam 2025

What is 'Net Income/Profit'?

1. The total revenue generated by a company

2. Revenues minus expenses

3. Income before taxes

4. Total assets minus total liabilities

The correct answer is: Revenues minus expenses

Net income, also known as profit, is defined as the amount of money remaining after all expenses have been deducted from total revenues. This figure provides a clear indication of a company’s profitability over a specific period of time. This choice accurately captures the core concept, as it involves taking the total revenues a company generates and subtracting all associated costs, such as operating expenses, cost of goods sold, interest, and taxes. The result is a figure that reflects the financial success of the company during that timeframe. The other choices do not align with the definition of net income: one refers to total revenue without considering expenses; another mentions income before taxes, which does not account for all expenses; and the last option describes a balance sheet concept related to equity, rather than income or profit.