Monday, 12 November 2018

Net profit formulas and Examples

Net profit is the difference between whole and whole load of revenue generated by the company.

The concept of profit is the difference in earnings is greater than the load.

If the difference between the revenues turned out to be smaller than the load, then it is a loss.

And if the income as great as the amount of load that is issue, then it is a break even point.

Step 1: look for gross profit

To search for net profit, the first step is to find a gross profit advance.

Basically, the gross profit is the difference of the proceeds and costs incurred to produce the product/goods/services.

The Formula Gross Profit

Gross Profit = Net Sales-HPP (Cost of Goods Sold)

# Net Sales

Net sales could be said as a result of the sale of the company's revenue after deducting all costs incur in the sale.

Like when done selling companies provide discounts, there is the cost of transport from the warehouse to the buyer's place and the presence of goods that return by the buyer because the goods are not in accordance with the specifications or defects.

So, the formula for figuring net sales is
Net Sales = Sales of Sales – Return Sales

Additional notes:

net sales are not always in the form of cash, but can also be in the form of receivables.

This is because sales made not necessarily cash transactions, sales are also recognize as credit sales.

# HPP (Cost of Goods Sold)

HPP (cost of goods sold) or COGS (cost of god sold) are all the costs associated with the production of goods or the goods sold

At a trading company, HPP or costs associated with trade goods includes the cost of purchasing merchandise, including the supply of merchandise purchased in the previous period

So the formula to search for the HPP is
HPP = Initial Inventory-Purchase Net-Ending Inventory

While the amount of net purchases effected by purchase, the purchase, return transport fare and discounted purchases.

So the formula net purchases:

Purchase Clean = Purchase Cost + Purchase – Return Transport of the Purchase

However, for the HPP on the company's manufacturing industry will be different.

In the manufacturing industry, merchandise created/produced by themselves.

There are costs in producing raw materials, labor costs and overhead costs.

The formula HPP on the manufacturing industry are:
HPP = Raw Material Cost + Direct Labor Cost + Overhead

Step 2: calculate the net profit

Net profit is the gross profit is reduce by any costs incur such as operating costs and the cost of nonoperational.

Plus, the income earned from non-operating activities if any. As interest income or income results from the sale of fixed assets of the company.

An example is the operational costs of marketing costs, administration costs, depreciation costs.

Non-operating expenses while the examples are interest charges (interest), and tax (tax).

# The Net Profit Formula


= EBITDA Earnings before Interest, Tax, Depreciation and Importation (earnings before interest, taxes, Depreciation and Amortization)

= EBIT Earnings before Interest and Tax (Profit before interest and taxes)

= EBT Earning before Tax (profit before tax)

Sample Income Statement Net PT WIKA Realty

The following sample income statements on company PT WIKA Realty, a subsidiary of PT WIKA engaged in property.

Look at the sample income statement PT WIKA Realty the

to figure net profit first is calculating the gross profit obtained from the reduced net sales by HPP.

Then gross profit will be reduce by the burden of effort, interest charges and the tax burden.

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