ABSTRACT
Net Profit The net profit or net income of a business is the amount of money left over after variable costs (i.e., costs which are directly related to the amount of product being produced) and fixed costs (i.e., those costs which must be paid even if the firm produces nothing) are subtracted from the total sales revenue. For example, if a company has total sales of $1,000,000, fixed costs for the plant and all salaried personnel of $500,000, and variable costs for selling expenses, material, transportation, etc. of $300,000, then their net profit is $200,000. This
is calculated as: $1,000,000 $500,000 $300,000 $200,000 before income taxes. If the income tax rate is 10%, then their taxes are $20,000 (10% $200,000) so the net profit after taxes is $180,000.
