Business Profitability Calculator

Formula

To calculate the profit of a business:

\[ \begin{align*} GP &= NS - COGS \\ OP &= GP - OC \\ NP &= OP + I - E - T \end{align*} \]

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

What is Business Profit?

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.

Example Calculation 1

Let's assume the following values:

Net Sales ($NS$) = \$1,000,000
Cost of Goods Sold ($COGS$) = \$400,000
Operating Costs ($OC$) = \$200,000
Additional Income ($I$) = \$50,000
Additional Expenses ($E$) = \$30,000
Taxes Paid ($T$) = \$70,000

Using the formula:

\[ \begin{align*} GP &= 1,000,000 - 400,000 = 600,000 \\ OP &= 600,000 - 200,000 = 400,000 \\ NP &= 400,000 + 50,000 - 30,000 - 70,000 = 350,000 \end{align*} \]

The net profit is \$350,000.

Example Calculation 2

Let's assume the following values:

Net Sales ($NS$) = \$500,000
Cost of Goods Sold ($COGS$) = \$200,000
Operating Costs ($OC$) = \$100,000
Additional Income ($I$) = \$20,000
Additional Expenses ($E$) = \$10,000
Taxes Paid ($T$) = \$30,000

Using the formula:

\[ \begin{align*} GP &= 500,000 - 200,000 = 300,000 \\ OP &= 300,000 - 100,000 = 200,000 \\ NP &= 200,000 + 20,000 - 10,000 - 30,000 = 180,000 \end{align*} \]

The net profit is \$180,000.