Net Profit

Net Profit is what is left over in a business after all expenses and income have been taken into account.  

It takes into consideration:
-    Cost of Goods Sold (COGS)
-    Work in Progress (WIP)
-    All operating expenses
-    Depreciation
-    Amortisation
-    Interest charges
-    Taxation

Operating Profit

Operating Profit takes into consideration all expenses of the business except for interest and taxation.  

It takes into consideration:
-    Cost of Goods Sold (COGS)
-    Work in Progress (WIP)
-    All operating expenses
-    Depreciation
-    Amortisation

Gross Profit

Gross profit takes into consideration the total revenue (sales) of a business less the Cost of Goods Sold (COGS).  COGS consists of all direct expenses required to deliver the sales.

It takes into consideration:
-    Raw Materials
-    Labour of the people directly related to selling and / or delivering the service and / or product

It generally does not include expenses such as advertising; telecommunication; transport costs etc.

Although Profit Key Performance Indiactors (KPI) can give great insight into how a busienss is performing, it should be noted that they can be manipulated to acheive a certain desired result, that is not necessarily the correct one.  Therefore Profit KPIs are best used in conjunction with other KPIs.  For instances KPIs that focus on the balance sheet of a business.

If you would like to discuss further please contact us:
McNamara and Co - Chartered Accountants, located minutes from the Melbourne CBD
www.mcnamaraandcompany.com.au/contact-us
Phone +61 3 9428 1062
Email admin@mcnamaraandco.com

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