Net Profit

A situation where direct incomes and indirect incomes exceeds direct expenses and indirect expenses are called net profit.

 A company's total earnings (or profit). profits is calculated by taking revenues and adjusting for the value of doing business, depreciation, interest, taxes and different expenses. This variety is found on a company's financial statement and is a very important live of however profitable the corporate is over a amount of your time. The live is additionally wont to calculate earnings per share.

An individual's financial gain when deductions, credits and taxes square measure factored into gross financial gain. Deductions and credits square measure subtracted  from gross financial gain to attain ratable financial gain, that is employed to calculate revenue enhancement. Net income is revenue enhancement subtracted  from ratable income.

Net income is calculated by beginning with a company's total revenue. From this, the value of sales, along side the other expenses that the corporate incurred throughout the amount, is removed to succeed in earnings before tax. Tax is subtracted from this quantity to succeed in financial gain variety. Net income, like different accounting measures, is prone to manipulation through such things as aggressive revenue recognition or by concealing expenses. once basing associate investment call on profits numbers, it's necessary to review the standard of the numbers that were wont to attain this worth.

For example, suppose that your gross financial gain is $50,000 and you've got $20,000 in deductions and credits. This leaves you with a ratable financial gain of $30,000. Then, suppose that another $5,000 of revenue enhancement is subtracted; the remaining $25,000 are going to be your profits.

 Example

Income Statement for Company XAZ, Inc.
for the year ended December 31, 2008

Total Revenue                        $200,000

Cost of Goods Sold               ($ 20,000)
Gross Profit                             $ 180,000

Operating Expenses    
 Salaries               $15,000   
 Rent                    $15,000
 Utilities                 $10,000
 Depreciation        $20,000
Total Operating Expenses    ($ 50,000)

Operating Income                      $120,000
Interest Expense                   ($ 10,000)

Taxes                                       ($ 10,000)

Net Profit                                $ 100,000