What is net profit

what is net profit

What is net profit?

If you're a small business owner in the UK, then you need to know about net profit. Net profit (NP) is a key metric that will give you an indication of the profitability of your business. Read on to find out more about net profit and how to calculate it.

 

What is net profit?

Net profit is the total revenue from your business minus the total expenses incurred by your business. This metric provides a clear picture of your business's overall profitability. It's important to note that this does not take into account any taxes that may be payable on profits.

 

How do I calculate net profit?

There are a few different ways to calculate it, but the most common method is as follows:


Revenue - Cost of Goods Sold (COGS) - Expenses = Net Profit


To calculate your revenue, simply add up all of the money that your business has brought in through sales and other sources. 


To calculate your COGS, you'll need to add up the costs associated with producing the goods or services that you sell.  These costs might include materials, labour, shipping, etc.

 

Finally, to calculate your expenses, add up all of the non-COGS expenses that your business has incurred, such as advertising, rent, utilities, etc.

 

Once you've calculated all three of these figures, simply subtract your COGS and expenses from your revenue to get your answer.


 

Net profit is a key metric for any small business owner in the UK. It provides a clear indication of profitability and can be used to make important decisions about where to allocate resources. To calculate, simply subtract your total expenses from your total revenue. Remember, this figure does not take into account any taxes that may be payable on profits.


You can find out what Gross Profit means here

And you can find out what Net Profit Margin is here


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About the Author

Annette Ferguson 

Owner of Annette & Co. - Chartered Accountants & Certified Profit First Professionals. Helping online service-based entrepreneurs find clarity in their numbers, increase wealth and have more money in their pockets.

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