net profit

Meaning

Net profit is the actual amount of money a business has left over after paying all of its expenses, including taxes, interest, rent, and salaries. It is often called the 'bottom line' because it is located at the very bottom of an income statement. This is the ultimate measure of a company's financial success.

Examples

• Our net profit doubled this year because we cut down on administrative overhead.

  Our net profit doubled this year because we cut down on administrative overhead.

• After paying all taxes and operating expenses, our net profit was fifty thousand dollars.

  After paying all taxes and operating expenses, our net profit was fifty thousand dollars.

• A company can have high sales but still make zero net profit if its expenses are too high.

  A company can have high sales but still make zero net profit if its expenses are too high.

• The board of directors decided to reinvest our net profit back into research and development.

  The board of directors decided to reinvest our net profit back into research and development.

• We need to analyze our net profit to see if we can afford to hire more staff.

  We need to analyze our net profit to see if we can afford to hire more staff.

Common Mistakes

• ✗ Net profit is the money we make before paying taxes.

  ✓ Net profit is the money we make after paying taxes.

  Net profit is the final figure after all deductions have been made, including taxes, interest, and operational overhead.

• ✗ The store's net profit was very high, but they spent too much on rent.

  ✓ The store's gross profit was very high, but they spent too much on rent, leading to a low net profit.

  Rent is deducted before calculating net profit, so high rent directly reduces net profit rather than existing alongside a high net profit.

Related Expressions

Practice

• After deducting taxes, interest, and overhead, our ___ was quite small.

  💡 This is the final profit, also known as the bottom line.

  Show answer

  net profit

• Investors are mostly interested in the company's ___ rather than just its total revenue.

  💡 It shows the actual money left over after all expenses.

  Show answer

  net profit