DECA+ Business Management and Administration Practice Exam 2025 - Free Business Management Practice Questions and Study Guide

Net income is a key financial metric used to indicate a company's profitability because it represents the amount of money that remains after all expenses, taxes, and costs have been subtracted from total revenue. This figure reflects the company’s actual profit and provides insights into how well the company is performing financially over a specific period. It is often considered the bottom line, as it is a definitive measure of a company's financial health and effectiveness in generating profit from its operations.

In contrast, while total revenue indicates the overall sales generated by the company, it does not account for any costs or expenses, which is essential for determining profitability. Gross margin provides insight into the profitability of individual sales after direct costs but does not consider other operating expenses or taxes that affect net income. Operating cash flow measures the cash a company generates from its regular operational activities, but it does not directly reflect profitability since it focuses on cash rather than overall income after costs. Thus, net income is a more comprehensive gauge of a company's profitability in the context of its financial operations.