Net sales = gross sales – (customer discounts, returns, and allowances) Gross profit = net sales – cost of goods sold Operating profit = gross profit – total operating expenses Net profit = operating profit – taxes – interest Net profit = net sales – cost of goods sold – operating expense – taxes – interest

Another equation to calculate net income: Net sales = gross sales – (customer discounts + returns + allowances) Gross profit = net sales – cost of goods sold Gross profit percentage = [(net sales – cost of goods sold)/net sales] × 100%. Operating profit = gross profit – total operating expenses Net income = operating profit – taxes – interest

Another equation to calculate net income: Net sales (revenue) - Cost of goods sold = Gross profit - SG&A expenses (combined costs of operating the company) - Research and development (R&D) = Earnings before interest, taxes, depreciation and amortization (EBITDA) - Depreciation and amortization = Earnings before interest and taxes (EBIT) - Interest expense (cost of borrowing money) = Earnings before taxes (EBT) - Tax expense = Net income (EAT)

Here is how you reach net profit on a P&L (Profit & Loss) account: Sales revenue = price (of product) × quantity sold Gross profit = sales revenue − cost of sales and other direct costs Operating profit = gross profit − overheads and other indirect costs EBIT (earnings before interest and taxes) = operating profit + non-operating income Pretax profit (EBT, earnings before taxes) = operating profit − one off items and redundancy payments, staff restructuring − interest payable Net profit = Pre-tax profit − tax Retained earnings = Profit after tax − dividends

Net profit is a measure of the fundamental profitability of the venture. "It is the revenues of the activity less the costs of the activity. The main complication is . . . when needs to be allocated" across ventures. "Almost by definition, overheads are costs that cannot be directly tied to any specific" project, product, or division

Net profit: To calculate net profit for a venture (such as a company, division, or project), subtract all costs, including a fair share of total corporate overheads, from the gross revenues or turnover. Net profit = sales revenue − total costs