Which term represents the difference between revenue and expenses on the income statement?

• A. Net income
• B. Gross profit
• C. Operating income
• D. EBITDA

Answer: (A)

Net income is the bottom-line measure, representing the difference between total revenue and all expenses. It captures profit after every cost is accounted for, including operating expenses, interest, taxes, depreciation, and amortization. That’s why it’s the best answer here—the amount left after subtracting all costs from revenue shows the company’s true profitability.

Understanding the other terms helps clarify why they aren’t the right pick: gross profit subtracts only the cost of goods sold from revenue, so it doesn’t include operating expenses. Operating income goes a step further by subtracting operating expenses from gross profit but still excludes non-operating items like interest and taxes. EBITDA removes non-cash charges like depreciation and amortization (and ignores interest and taxes), focusing on operating performance before these items. Net income is the complete bottom-line figure after all such items.