Revenue minus expenses9/5/2023 ![]() ![]() Here’s the formula you would use to determine your business’s net profit: While net profit shows how much cash a business generates, profitability also depends on how the generated cash is invested. In some cases, however, the net profit figure can be misleading. Owners and stakeholders often rely on net profit numbers to give the most accurate picture of how well a business is doing financially. Net profitĪfter you’ve deducted all expenses – including taxes and interest – the income left is called net profit or net income. Variable expenses can change based on numerous factors, so you can’t always predict what they will cost. A fixed expense doesn’t change it’s a set amount you pay regularly. Total sales – cost of goods sold = gross profit Sales totals are generally the first line item on an income statement, with the cost of goods sold listed next.
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