How to calculate net profit?

If you own your small business, then the most important indicator for you is the net profit that it brings to you. After all, the net profit is directly the money that your business brought to you, and which you can dispose of at your own discretion. So, this indicator is extremely important to determine before calculating the economic efficiency. Efficiency is nothing more than a ratio of net profit to cash investments.

It is not difficult to guess that it is not enough to deduct expenses from your incomes to determine how much money you have left in your hands, because you also need to consider several other important factors. In fact, all this is done quite easily, and if you still do not know how to calculate the net profit, then in a few minutes this process will become elementary for you.

So, first, you need to determine the gross profit, also known to the people, as simply a profit. In how to calculate profits, there is nothing complicated. If you know the cost of production, then you just subtract the cost price from the price and multiply it by sales. If you did not take into account in calculating the cost of fixed costs, such as: depreciation, rent, salaries of managers, and so on, then you need to subtract from the resulting total amount also them. The result is the gross profit with which we have to work before calculating the net profit.

Now from gross profit it is necessary to take away one by one or add the following indicators: financial profit, other operating profit, and, of course, tax deductions. Financial profit is the profit that the enterprise received, but which is not directly related to its primary business. To make it easier to understand, these are the revenues or expenses from playing in the securities market, payment for borrowed funds or, on the contrary, income from all kinds of investments. Thus, the financial profit does not involve the participation of the enterprise itself in the process of generating revenues, but involves the use of enterprise funds. We take into account the financial profit and go further.

The next term in our work with how to calculate the net profit will be another operating profit. Under this incomprehensible name are hidden, only, income and losses, which can be called accidental. For example, at the enterprise there was a fire or the enterprise managed to find a treasure on the territory. Despite the fact that each separately the situation seems unlikely, in fact such occasional "arrivals" and "withdrawals" the enterprise has quite a lot and forget about them is not worth it.

And finally, it's time to deduct tax deductions from your income indicator from the state. The tax legislation is rather complicated and confusing. Some incomes may not be taxed, and some expenses, on the contrary, can not be deducted in calculating the taxable base. So, if you do not know how to accurately determine your debt to the state, then it's better to turn to the help of specialists, so that then there are no problems. Anyway, deduct the amount of tax deductions - and what you get will be a net profit.

Now that you know how to calculate the net profit, you can easily and quickly analyze the real success of your business. It is likely that, in appearance, the successfully operating enterprise may in fact turn out to be even unprofitable, and the enterprise where you were going to put up the cross is to bring an impressive net profit. To protect yourself from errors, always keep this figure in mind, taking important management decisions.