What distinguishes "net income" from "gross profit"?

Net income is distinguished from gross profit primarily by the fact that net income accounts for all expenses incurred by a business, whereas gross profit focuses solely on the revenue generated from sales minus the cost of goods sold (COGS).

Gross profit is calculated by subtracting the COGS from total revenue, reflecting the efficiency of turning raw materials into finished products without considering other expenses like operating costs, interest, taxes, and administrative expenses.

In contrast, net income takes into account all of these expenses to provide a clearer picture of a company's profitability over a specific period. It represents the actual earnings available to shareholders after all costs have been deducted, thus showcasing the bottom line of a company’s overall financial performance.

This distinction is crucial for understanding a company's operational efficiency and overall profitability, as gross profit alone does not give a complete view of a company's financial health.