Comm112 Lecture 5th March

Profit Calculation

• Gross Profit

  • The initial profit derived from sales after deducting the cost of goods sold (COGS).

  • Formula: Gross Profit = Revenue - COGS

• Operating Expenses

  • The costs required to run the business but not directly tied to production.

  • Examples include salaries, rent, utilities, and marketing expenses.

• Depreciation

  • The allocation of the cost of tangible assets over their useful life.

  • Important for accounting as it reduces taxable income.

• Net Profit Calculation

  • To find net profit, deduct operating expenses and depreciation from gross profit.

  • Formula: Net Profit = Gross Profit - Operating Expenses - Depreciation

• Significance of Net Profit

  • Indicates the actual profitability of a company after all expenses.

  • Critical for financial assessments and decision-making.