ECONOMICS (CBSE/UGC NET)

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.

Detailed explanation-2: -Net profit (also called net income or net earnings) is the value that remains after all expenses, including interest and taxes, have been deducted from revenue. This is the final figure located at the bottom of the income statement.

Detailed explanation-3: -There are three main measures of profit. These are gross profit, operating profit and net profit.

Detailed explanation-4: -Also referred to as net income, gross profit measures a company’s dollar amount profits after deducting its production costs. In other words, gross profit equals a business’s total sales revenue minus its costs of production, commonly known as cost of goods sold (COGS).

Detailed explanation-5: -Normal profit is defined as the minimum return that the producer expects from the capital invested in the business. If this minimum return is not available, he will withdraw his capital from the existing use and shift it to the next best alternative use. Therefore, normal profit is a part of total cost.