Basically, it is all of the gross income (all the money you took in) minus all the money you had to spend in order to do business, like raw materials, manufacturing, building costs, staff costs, insurance, maintenance, cost of utilities, supplies, packaging, transportation, etc etc. You hope that what you take in covers all of your costs and leaves some profit besides. That is net profit.
Net profit margin is calculated as net income divided by sales.
Gross Profit Margin = Gross Profit/Revenues Net Profit Margin = Net Profit/Revenues
net profit/sales
Net Income = Sales - Gross profit Gross Profit - Cost of Production = Net Income
Net Profit Before Tax(N.P.B.T.) = Total sales - Total Expenses.
(Net profit/Net Revenue) * 100 = Net Profit Percentage Ex: Net Revenue = 10,000 USD Expenditure = 7500 USD Profit = 2500 USD Profit Percentage = 2500/10000 * 100 = 25%
ROS= NET PROFIT/ SALES
Gross Profit/Net Sales = Gross Profit Margin.
The Gross Profit Margin = Gross Profit/Revenue*100 regardless of weather the Gross Profit is positive or negative (a loss). Therefor, it is acceptable to have a negative Gross Profit Margin.
The profit and loss account is the account that can be used to calculate the net loss.
Profit Margin ratio is the comparison of profit as a percentage of revenue and calculated as follows Profit Margin ratio = Net Profit/Revenue
Gross and Net profit are virtually the same. They both calculate EBT, earnings before taxes - all overhead and salaries.