What is Net Profit?

Net Profit can be defined as a difference between the gross profit and operating as well non-operating expenses of a business. It is calculated by subtracting both operating and non-operating expenses from the operating profit after considering non-operating incomes as well. Algebraically, it can be written as

Net Profit = Gross Profit – Operating Expenses – Non-operating Expenses + Non-Operating Incomes

Non-operating expenses are those expenses that are not directly related or incurred for carrying the business activities. It consists of loss on sale of fixed assets, interest on the loan, loss due to accident, etc. In the same way, non-operating incomes are those incomes that are not directly generated from the main business activities of a business. It consists of profit on the sale of fixed assets, income received from investments, etc. Net profit can also be calculated with the help of operating profit by using the given below formula

Net Profit = Operating Profit + Non-Operating Incomes – Non-Operating Expenses


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