Today’s article, I will introduce the concept of what is net profit? and how to calculate net profit. If you are a business person or intend to invest in a business in the future or you are simply an accountant, there is a concept you cannot ignore that is net profit.

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Let’s find out together in this article.

General formula for calculating net profit

Net profit = Total revenue of the business – (10% VAT + 30% operating expenses) – 20% CIT.

We assume:

A = total revenue of the business in a given period. B = 10% of VAT of the business subject to VAT = 10%A = 0.1A.C = 30% (+-5%) of operating expenses enterprises have to spend = 30%A = 0.3A.D which is level 1 profit after deducting operating expenses and VAT.

=>We have: level 1 profit after deducting operating expenses and VAT is D = A-(B+C)=A-(0.1A+0.3A)=0.6A.

E is 20% (+-2%) CIT after deducting operating expenses and subject to VAT = 20%D = 0.6A*20% = 0.12A.F is net profit.

Based on the above formula: Net profit = Total revenue – (10% VAT + 30% operating expenses) – 20% CIT

Equivalent to: F = A – (B+C) – D, we replace the constants B, C, D with the value A, we get:

F= A – (0.1A + 0.3A) – 0.12A.

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F=0.48A.

Based on the above formula, to calculate net income, we just need to multiply 0.48 times the total revenue of the business.

Note: The factors affecting net profit are operating expenses of the enterprise with fluctuations of 5% (>5% or Bac Ninh betel and areca project).

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What is the meaning of net profit

?Many people will ask the question, so what is the net profit (profit after tax) for?

The value of profit after tax shows what percentage of the business’s total revenue is profit. It determines whether the company or business enterprise makes a profit or suffers a loss. The value of after-tax profit is greater than zero and the larger it is, the more profitable the company is. On the contrary, this value is less than 0 which means that the company makes a loss and needs to come up with a new business direction or strategy for the company or business.

Net profit ratio depends on business characteristics and each business line. Therefore, the person in charge of financial analysis for the company can only use the value of after-tax profit to compare the enterprise with the industry average ratio or with other enterprises in the same industry and especially. must be compared at the same time.

Above is an article to learn about What is net profit? How is net profit calculated? And the meaning of net profit.

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If you have any questions or if any of the above information is incorrect, please leave a comment.