What does net income represent?

Net income is a crucial financial metric that represents the excess of revenues over expenses for a designated period, often referred to as a company's profitability. It is calculated by subtracting total expenses, including operating costs, interest, taxes, and other expenses, from total revenues generated during that same period.

This definition encapsulates the performance of the company over a specified timeframe, reflecting how much profit is earned after covering all expenses. It is important for investors, management, and analysts as it indicates the company’s ability to generate profit, which can be reinvested, distributed as dividends, or used for other strategic decisions.

The other options do not capture the essence of net income. While total expenses represent costs incurred, and the difference between assets and liabilities defines equity, these do not reflect profitability. Additionally, total sales pertain to revenue generation but do not account for expenses, which is essential for calculating net income. Thus, identifying net income as the excess of revenues over expenses accurately describes its role in financial reporting and analysis.