Net profit

What remains after every cost, including interest and tax, has been subtracted from revenue. The bottom line of the income statement.

Example

Northgate's net profit rose from 255,000 to 345,000, an increase of 35.3%.

Important

It is the end of a chain of subtractions, so on its own it cannot tell you whether the product is profitable, the overhead is controlled or the debt is affordable. Those answers are all further up.

Related terms

• Income statement — A report of what a business earned and what it spent over a period of time, arranged in layers from revenue at the top down to net profit at the bottom.
• Retained earnings — The accumulated total of every profit the business has ever made and not paid out to its owners, carried on the balance sheet inside equity.
• Quality of earnings — How reliably reported profit turns into actual cash, most simply measured as operating cash flow divided by net profit.

Lessons that explain it

• The income statement: what it claims was earned — The income statement is a claim about performance over a period, assembled under rules that deliberately ignore when the cash moved. Read properly it is the most useful statement; read literally it is the most misleading. (12 min)

All 578 terms in the Investing glossary