The profit remaining after all expenses, overhead, and taxes are deducted—the true bottom-line earnings.
Net profit is what's left after everything is paid. Start with your total revenue, subtract direct job costs, subtract overhead (rent, insurance, utilities), subtract other expenses, and subtract taxes. What remains is net profit—the money you actually earned.
Also called the bottom line, net profit is the most complete measure of your business's profitability.
The basic formula:
Or broken down: Revenue − Cost of Goods Sold = Gross Profit. Gross Profit − Operating Expenses = Operating Income. Operating Income − Taxes = Net Profit.
Gross profit only subtracts direct job costs from revenue. Net profit goes further, subtracting all operating expenses and taxes. You can have strong gross profit but weak net profit if your overhead is too high. Net profit is what you can actually put in your pocket or reinvest in the business.
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