Net Profit

What is net profit?

A measurement of a company's profit once operating costs, taxes, interest and depreciation have all been subtracted from its total revenues. The term is often referred to as a company's 'bottom line' and may also be described as 'net earnings' or 'net income'.

Where have you heard about net profit?

You'll often see the term crop up in newspaper reports regarding the financial performance of listed companies. Investors can use it to work out how well a particular company has performed over a certain period of time.

What you need to know about net profit...

You can work out a company's net profit by reading its income statement and applying this very basic calculation:

total revenue - total expenses = net profit.

If the charges and expenses racked up by a company are larger than its revenues, it's said to make a net loss rather than a net profit.

A range of factors can have a bearing on a firm's net profit. For example, inadequate financial management, falling sales and poor customer service might all lead to weak profits or a loss.