Question

whats the difference and please its definition

between

1)gross income

2)net income

3)net worth

4)equity

please specify its formula...

Answer 1

1) Gross income is the income generated from an entity/individual sales or service. It is calculated by subtracting the cost of sales from sales revenue. So this margin tells how much income is earned by the business from its sales and deducting only those expenses which are directly related to the product

Gross income =Sales/service revenue-Cost of sales/services

2) Net income is the total income which an entity generates from its operating activities,. It takes into consideration all the expenses .

Net Income=Sales-COGS-total other expenses

3) Net Worth is the amount by which assets are more than liabilities. For the company we can say net worth is the shareholder equity, more it is better it is. Net worth of the company tells what is net owned by the company. If company earns profit than the net worth increases and vice versa.

Net Worth= Total assets- Liabilities

4) Equity is the amount which is owned by the company. It the amount which is owned by the shareholders of the company. It is again calculated by subtracting total liabilities from total assets.

Equity= Total assets- Liabilities