What is the net profit?

It is important to know what the net profit means, as well as its difference between gross profit. But what do both concepts mean?

Net profit turns out to be the subtraction of net income and expenses that you have incurred over a period of time to be able to carry out a business activity. Gross profit, on the other hand, are the profits that a company has obtained taking into account only the activity that it has carried out.

And, the latter that we have indicated, is its main difference compared to net profit, since gross profit does not take into account: amortization o depreciación of assets; the interests that have been incurred to obtain the resources of the business liability; nor the payment of taxes that would have to be deducted for the activity carried out.

From this information, we can calculate two different parameters. This is the net profit itself, and the profit margin net. Let's see what each of them consists of and how it is calculated.

How to calculate the net benefit?

The net profit represents the totality of profits obtained by the company once the interests have been discounted, impuestos, depreciation of assets and other general expenses. Its formula:

Net Profit = Gross Profit (Sales income - Sales costs) - Taxes - Interest on liabilities - Depreciation of assets - Other general expenses

Net profit margin

This concept helps us to know the amount of cash flow that we can find in a company, indicating the entrepreneurial capacity to develop the activity it generates. For the calculation, we will have to help ourselves with the sales caused during the period that we have taken into account. Thus, the formula is as follows:

Net Profit Margin = Net Profit / Sales

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