Enter the net sales, cost of goods sold, operating costs, additional income, additional expenses, and taxes into the calculator. The calculator will determine the gross profit, operating profit, and net profit of the business.
Business Profit Formula
The following formula can be used to calculate the profit of a business.
GP = NS – COGS
OP = GP – OC
NP = OP + I – E – T
- Where GP is the gross profit
- OP is the operating profit
- NP is the net profit
- NS is the net sales
- COGS is the cost of goods sold
- OC is the operating costs
- I is additional income
- E is additional expenses
- T is taxes paid on income
Business Profit Definition
A business’s profitability is defined as the total net profit a business earns over a given period of time. Sometimes, this profitability is displayed as a percentage of revenue, also known as profit margin.
How to calculate business profit?
First, determine the net sales and cost of goods sold. For this example, the net sales are $1000.00 and the COGS is $200.00.
Next, using the net sales and COGS we can calculate the gross profit. GP = $1,000.00 – $200.00 = $800.00.
Next, determine the operating costs. This includes any costs associated with running and operating the business itself. For this example, the operating costs are $200.00.
Using the operating costs and gross profit, the operating profit can be calculated using the formula above. OP = $800.00 – $200.00 = $600.00.
Next, determine any additional income, expenses, and taxes. In this case, $100.00 additional income was earned through investments, there was $50.00 in additional expenses, and the company paid $200.00 in taxes.
Finally, using the formula above we can calculate the net profit.
NP = OP + I – E = T
= $600.00 + $100.00 – $50.00 – $200.00