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Net Profit
Definition
Net profit is the actual profit after all expenses, including operating costs, interest, taxes, and other deductions, have been subtracted from revenue.
Explanation
Net profit is the bottom line that shows a business's true profitability. Net profit margin = Net Profit / Revenue × 100. Investors and lenders focus on net profit when evaluating business health. Growing net profit increases business value and owner income.
Increasing net profit can be achieved through revenue growth, cost reduction, tax optimization, or a combination of strategies.
Example
A business with $1M revenue, $600K COGS, $250K operating expenses, and $50K taxes has a net profit of $100,000 (10% margin).