Which of the following best defines net income?

Net income is best defined as the total revenue minus total expenses. This definition captures the essence of how businesses measure their profitability. It reflects the money a company retains after covering all its operational costs, including costs of goods sold, operating expenses, interest, and taxes.

Understanding net income is crucial because it provides a clear picture of a company's financial performance over a specific period. It indicates how efficiently a company is managing its revenues and expenses, serving as a key metric for investors, management, and analysts when evaluating the business's profitability and financial health.

The other definitions do not accurately reflect the concept of net income. For instance, calculating total sales minus total liabilities does not address profitability, but rather focuses on the relationship between sales and debts. Similarly, total assets minus total equity relates to a company's balance sheet and does not measure income. The sum of cash inflows minus cash outflows pertains to cash flow rather than net income, as it addresses cash management rather than profitability from operations.