Depreciation of assets and amortizationįinally, you subtract the added expenses from the total sales revenue.Next, you have to add up all the expenses, including: Total Revenue (net sales) = Quantity of goods/services sold * unit price Using the net profit formula above, determines your total revenue. Gathering all the figures you'll need presents the complex part, but it shouldn't be a problem if you keep proper records. It's calculated for a specific accounting period.Ĭalculating net profit is straightforward. The net profit is what companies use to pay their shareholders and invest in that new equipment you've been eyeing, or save for future use. At the same time, the revenue includes all the income from product and service sales and earnings from investments. The business expenses to be deducted include the cost of goods sold, interest expense on loans and other debts, income tax, depreciation of fixed assets, operating costs, administrative and general expenses. Net Profit = Gross Income - Total Expenses Net Income = Total Revenue - Total Expenses or The net profit formula for calculating the net profit is: Though they mean the same thing, subtle differences exist depending on their position on a company's income statement. Sometimes you may use the term net profit synonymously with net income or net earnings and, in some cases, bottom line. It is an indication of a company's profitability. The amount depends on the industry and the company's management.
Net profit is the amount of money left after subtracting a company's total expenses from its total revenue for a specific period of time. Net profit formula FAQs What is net profit?
How ProfitWell Metrics can help you track important revenue metricsĨ.
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