What Is Net Profit And How To Calculate It

Net profit is a financial metric that represents the amount of money a company earns after subtracting all of its expenses from its total revenue. In other words, it’s the profit that a company makes after all costs, including taxes and interest payments, have been deducted.

To calculate net profit, you need to first determine the company’s total revenue or gross income, which is the total amount of money earned from all sources. Then, you need to subtract all of the company’s expenses, including the cost of goods sold (COGS), operating expenses, taxes, and interest payments.

The formula for calculating net profit is:

Net Profit = Total Revenue – Total Expenses

For example, if a company’s total revenue is $1,000,000 and its total expenses are $800,000, then its net profit would be:

Net Profit = $1,000,000 – $800,000 = $200,000

This means that the company has earned a net profit of $200,000 after all expenses have been paid.