Gross income can be used to calculate other financial figures and evaluate your business. Calculate and use gross income.
What’s gross income?
Gross business income is your company’s sales before taxes and other expenses. Revenue minus COGS equals gross income for your business.
Business income statements show gross income. You can calculate your gross income from the income statement if there is no line.
Gross income is gross margin and gross profit.
Gross revenue usage
Taxes and other business numbers start with gross income.
Business tax returns use small business gross income. Report and calculate taxes with this amount.
Gross income shows how much COGS is deducted from sales. Check gross revenue and COGS if your gross income keeps dropping. You may need help if gross revenue or COGS are falling or rising.
Your business’s debt-to-income ratio can be calculated using gross income. This ratio can help determine your business’s debt capacity. To calculate debt-to-income, divide debt by gross income.
Gross income calculation formula
Gross income formula:
Gross Income = Revenue – COGS
Gross revenue is your company’s sales before deductions.
The cost of goods sold includes production and purchase costs. Build tables. Tables require wood, glue, screws, and other materials. The COGS includes all table-building supplies.
Gross profit example
Your first-quarter sales are $250,000. Producing your goods cost $100,000. Subtract COGS from sales for gross income.
$250,000 – $100,000 = $150,000
Your first-quarter gross revenue was $150,000.
Gross vs. net income
Net income is what your business makes after subtracting expenses from gross income. Deduct taxes, utilities, marketing, and wages from gross income to calculate net income.
Take the gross income example. Your first-quarter gross revenue was $150,000 from $250,000 in sales and $100,000 in COGS. Your company spent $75,000 more. Net income is gross revenue minus these.
$150,000 – $75,000 = $75,000
Your first-quarter net income was
$75,000
