What is net profit?
Synonymous with net income, net profit is a company’s total earnings after subtracting all expenses. Expenses subtracted include the costs of normal business operation as well as depreciation and taxes. Net profit is commonly referred to as a company’s “bottom line” and is a true indicator of a company’s profitability.
While the basic net profit definition does not vary in content from that of net income, there is some variance in usage between organizations. Since the general term “profit” is calculated at different stages in a company’s financial reporting with varying qualifiers, “net profit” may appear on a financial statement in the context of “net profit after taxes” to differentiate between items accounting for and excluding taxes while keeping terms consistent.
To determine, follow this net profit calculation:
Net Profit = Total Revenue – (Total Expenses + Taxes + Depreciation)