What is Net Profit meaning?

Net profit is a key financial metric that reveals how much actual profit a business makes after accounting for all costs. It’s calculated by subtracting expenses such as cost of goods sold (COGS), operating costs, interest, and taxes from total revenue. Net profit is often referred to as the "bottom line" and is a core indicator of a business’s financial health and efficiency.

Example

“After deducting expenses, the startup reported a strong net profit in Q4, signaling sustainable growth.”

How is Net Profit used in business?

Businesses use net profit to assess overall profitability and performance over a specific period. Investors, stakeholders, and business owners rely on it to make decisions about expansion, budgeting, and financial planning. In digital businesses, it helps evaluate the success of monetization strategies and cost management.

Pro Tip

Always analyze net profit in relation to revenue and industry benchmarks - it gives context to how efficiently your business turns revenue into actual earnings.