ECONOMICS

Detailed explanation-1: -Net profit reflects the amount of money you are left with after having paid all your allowable business expenses, while gross profit is the amount of money you are left with after deducting the cost of goods sold from revenue. You need to calculate gross profit to arrive at net profit.

Detailed explanation-2: -In short, gross profit is your revenue without subtracting your manufacturing or production expenses, while net profit is your gross profit minus the cost of all business operations and non-operations. Your net profit is going to be a much more realistic representation of your company’s profits.

Detailed explanation-3: -Net profit is the difference between a company’s revenue and its expenses. It is calculated by subtracting a company’s total costs from its total revenue. This figure represents a company’s profit after all its costs have been paid.

Detailed explanation-4: -Comparison Chart Gross Profit is the income of the company left after paying off the direct expenses. Operating Profit is the income of the company left after paying off operating expenses. Net Profit is the residual income left with the company after all deductions. A rough estimate about the company’s profitability.

Detailed explanation-5: -Returning to our Elegant Eyewear example, say the company had SG&A expenses of $50, 000 and interest expense of $2, 000. The company’s net profit would be: gross profit of $235, 000 minus $50, 000 of SG&A expenses, minus $2, 000 of interest expense = net profit of $183, 000.