Calculating net income from assets and liabilities is critical for understanding a company’s financial health. Net income, the difference between revenue and expenses, represents a company’s profit or loss over a specific period. Assets (e.g., cash, inventory) and liabilities (e.g., debt, accounts payable) provide valuable insights into a company’s financial position.
This calculation has long been a fundamental aspect of accounting and has evolved with the development of accounting standards. It helps investors, creditors, and management make informed decisions about a company’s financial performance and stability.