What is net profit?

What is net profit and how to calculate net profit, the following article will share with you so that you have a better grasp of the concepts related to profit, thereby planning business strategies business in accordance with the financial position of the company

Learn about net profit

What is net profit?

Net operating profit is the profit earned from the enterprise’s net business activities. This entry reflects the business results of the enterprise, which is the difference between the revenue earned in the period after deducting all expenses incurred in the period, including the cost of all products. consumable goods.

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Formula for calculating net profit

Formula for calculating net profit

Net profit from business activities = Net revenue – Cost of goods sold + (Financial income – Financial expenses) – (Selling expenses + general and administrative expenses)


Net profit from business activities = Net revenue – Cost of all products sold during the period.

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In there:

Net revenue: is the revenue earned from selling goods and providing services after deducting deductions such as: sales discounts, trade discounts, sales returns, sales tax. especially, import and export tax.Cost of goods sold: understood in the simplest way is the entire cost of creating a product. Costs related to cost of goods sold include: Cost of direct materials, direct labor costs, and transportation costs. Financial income: includes financial leasing interest, profit from the lending of capital, revenues arising from royalties, dividends, profits distributed in the course of ordinary business activities of the enterprise. Financial expenses: are expenses incurred in operating activities. finance

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Net profit margin indicators

Net profit ratios

The net profit margin ratio (also known as the profit ratio or the profit-to-sales ratio). These expenses show the profitability of the business, a business with a high net profit margin will have a competitive position in controlling costs compared to other businesses. This is also an indicator on the financial statements that investors and business owners are very interested in. The formula for calculating net profit margin would be:

Net profit margin = Profit after tax / Net sales

This indicator is not only helpful for business owners, but also very valuable for investors to evaluate profitability from which to make investment decisions in the business. Net profit ratio is also one of the important factors to help credit providers evaluate the effectiveness of loan use and from here they will evaluate the ability of the business to pay interest on loans. Besides, with this indicator, business managers can directly control the cost issue and the result of management decisions.

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Above are the basic knowledge about net profit, hopefully the information on the article will help you find the answer to the question of what is net profit as well as determine the importance of profit. purely for the business to have future development orientations.