Investment Formula Description
Net profit or net income is actual profit for the company after deducting all the expenses from total revenue in the a given financial period of time.
Net profit is also refered as net earnings since it is the actual income or earnings after deducting all the expenses such as cost of goods sold ( COGS ), overhead , interest payable plus/minus one off items for a financial period ( usually one year) . If the outcome of net profit is negative figure after deducting all the expenses, then it is called net loss. Net profit or net income is commonly used together with profit margin.
Investment Formula Example
For this financial period, Corporation A has total $100,000 revenue with $60,000 of COGS, $20,000 of Overheads, and $10,000 of Interest Payable.
Net Profit = Revenue - Cost of goods sold - Overhead - Interest Payable = Gross Profit - Overheads - Interest Payable = 100,000 - 60,000 - 20,000 - 10,000 = $10,000
The net profit or net income for Corporation A is $10,000 for this financial period.
For the next financial period, the Overheads for Corporation A had increased to $40,000.
Net Profit = Revenue - Cost of goods sold - Overhead - Interest Payable = Gross Profit - Overheads - Interest Payable = 100,000 - 60,000 - 40,000 - 10,000 = - $10,000
In this case, Corporation A is having net loss of $10,000 for this financial period.