What does the equation for Business Income include?

The equation for Business Income focuses on the concept of income generated from the regular operations of a business during a specific period. This includes both net income and continuing operating expenses, as these two elements provide a clearer picture of the cash flow needed to maintain business activities during a time when income may be disrupted, such as after a property loss.

Net income comprises the profits earned from business operations after all direct expenses have been deducted. Continuing operating expenses represent the costs that continue to be incurred even when the business is temporarily unable to generate revenue, such as rent, utilities, and payroll. By combining these two components, the equation allows for a more comprehensive understanding of the financial impact on a business in the event of a loss, as it addresses both the lost income and the ongoing financial obligations. This makes it the correct approach for calculating Business Income under property insurance policies.