Net profit calculator

Formula

How it works

Subtract COGS from revenue for gross profit, operating expenses for operating profit, interest for profit before tax, then income tax for net profit. No tax is charged on a loss.

Worked example

The same calculation with the default values:

• Revenue 250,000
• Cost of goods sold 140,000
• Operating expenses 60,000
• Interest expense 5,000
• Income tax rate 20 %

1. gross profit = 250,000 − 140,000 = 110,000
2. operating profit = 110,000 − 60,000 = 50,000
3. profit before tax = 50,000 − 5,000 = 45,000
4. tax = 45,000 × 20 ÷ 100 = 9,000
5. net profit = 45,000 − 9,000 = 36,000

Result: Gross profit: 110,000.00 USD · Operating profit: 50,000.00 USD · Profit before tax: 45,000.00 USD

Common mistakes

• Confusing net profit with gross profit (revenue minus COGS only) - net profit subtracts operating expenses, interest and tax as well, and is always a smaller number.
• Forgetting to include interest expense or tax when they apply - leaving them out produces a figure closer to operating profit, not true net profit.
• Using net profit alone to judge business health without also looking at cash flow - a business can show an accounting profit while still running short on cash if customers pay slowly.