If the total of expenses is smaller than the total revenues, the difference is termed

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

Answer: (A)

When revenues exceed expenses, you’ve earned a profit—the amount left after every expense has been subtracted. This bottom-line figure is called net profit (often referred to as net income). It reflects all costs, not just production costs, nor just operating costs, but also interest and taxes in many contexts. Gross profit would only account for cost of goods sold, while operating profit excludes non-operating items like interest and taxes. So the difference between total revenues and total expenses is net profit.