How do you determine a client's net income when conducting a cash flow analysis?

To determine a client's net income in a cash flow analysis, subtracting all taxes from gross income is the appropriate method. This process allows you to identify how much of the total earnings (gross income) the client actually takes home after mandatory deductions such as federal and state taxes, Social Security, and potentially other deductions.

Net income is crucial for assessing cash flow because it reflects the actual financial resources available to the client for spending, saving, and investing after fulfilling tax obligations. Accurate net income estimation provides a clear picture of the client's financial health and assists in budgeting and planning.

The other options are not suitable for calculating net income. While adding all monthly income together is a step toward understanding total income, it doesn't account for deductions. Simply adding expenses would not give a clear insight into net income, and excluding variable costs would lead to an incomplete assessment of financial obligations. Each of those approaches does not precisely define the net income needed for a thorough cash flow analysis.