A more thorough explanation:

Definition: Net earnings, also known as net income, is the amount of money a person or business earns after mandatory withholdings and deductions are taken out. These deductions can include state and federal income tax, social security contributions, and other expenses.

For a business, net earnings are calculated by subtracting the cost of goods sold, general expenses, operating expenses, depreciation, interest, taxes, and other expenses from the total sales. Interest on a debt is also considered a deduction when calculating net earnings.

Net earnings are important for businesses because they represent the profit that is attributable to shareholders. This means that net earnings are the amount of money that a business can distribute to its owners or reinvest in the company.

Example: Sarah works at a retail store and earns a gross income of $2,500 per month. After taxes and other deductions are taken out, her net earnings are $2,000 per month.

Example: ABC Company has total sales of $100,000 for the year. The cost of goods sold is $40,000, and the company has $20,000 in general expenses, $10,000 in operating expenses, $5,000 in depreciation, and $15,000 in interest and taxes. To calculate the net earnings, you would subtract all of these expenses from the total sales: $100,000 - $40,000 - $20,000 - $10,000 - $5,000 - $15,000 = $10,000. This means that ABC Company has a net income of $10,000 for the year.

In both examples, the net earnings are the amount of money that the person or business actually earns after all deductions are taken out. This is the amount of money that can be used for personal expenses or reinvested in the business.