Earnings and Losses

What Is Net Profit?

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In Brief...

No figure seems more important to business stakeholders and those that peruse their financial statements than net profit. Net profit consists of all sales minus all costs including cost of goods sold, administrative expenses, and salaries and, in some cases, taxes and interest expenses on debt servicing. Unlike gross profit, net profit takes into account all expenses, not just the direct costs of producing the goods and, therefore, is the 'skinny' profitability measure of what it takes to bring a product to market, not just the direct input costs but also the cost of financing, storing, distributing and marketing those goods and services.. Net profit margin is a measure of what percentage of sales is net profit or how much of each sales dollar is retained as profit. Net profit is reported on the ?Income and Expense Statement? of financial reports.

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