Net Income vs. Profit: An Overview
In everyday use, many terms in business and finance have different or even unclear definitions. In the context of finance or accounting, some concepts that the average person may use interchangeably have highly specific definitions. Consider the terms profit and net income. Though both expressions refer to a surplus of revenue over expenses, their definitions and applications differ significantly.
How To Calculate Net Profit
The calculations for each are as follows:
- Gross profit: Revenue – COGS
- Operating profit: Gross profit – operating expenses – depreciation – amortization
- Net profit: Total revenue – total expenses
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