Net Profit – The final profit made by a business after all costs have been paid (including Government tax bill)

(Pronounced net prof-it)

To remember what net profit means use the following mnemonic:

What was left in the fishing net (net profit) was the final profits after all costs have been paid.

The formula to calculate net profit is:

Net Profit = Turnover - Total costs

Turnover is the value of all money in from sales, rent and interest. Total cost is the value of all the money going out from expenses to rates, fuel costs, utilities like gas and electricity, raw materials, wage bills. There are literally hundreds of costs included in running a company. The biggest cost is the tax by local government on land, tax on any profit made, and tax on any employee you have (called national insurance).