Net profit is the money left over after a company has paid all of its expenses. Net profit can also refer to earnings before or after tax, so some use “net net” to clarify net profit after taxes. Net profit is widely accepted as the general definition of profit. It is also sometimes called "net earnings" or "net income."
In simple words, Net profit is the company's total revenue minus its total expenses. To calculate net profit, subtract all expenses from total revenue.
Net profit is the company's Gross Profit minus its operating expenses. To calculate net profit, subtract operating expenses from gross profit.
Net profit is an important metric for investors to assess a company's financial health because it shows how much money the company is making after paying for its costs of goods and operating expenses. It is a good metric to assess a company's financial health, but it has its limitations. Investors should take into account the company's capital structure and true economic value when making investment decisions.
Net profit is used for many things, including:
- Paying dividends to shareholders
- Investing in new products or services
- Repaying loans
- Building up cash reserves
The advantages of using net profit are:
- It is easy to calculate.
- All expenses are included in the calculation.
- It provides a clear picture of the company's profitability.
The disadvantages of using net profit are:
- It does not take into account the company's capital structure.
- It does not reflect the true economic value of the company.
- Operating Profit
- Business Operations
- IT Operations (Information Technology Operations)
- IT Strategy (Information Technology Strategy)
- IT Governance