Business
Net Profit Calculator
Works net profit, which is what remains after everything including the owner.
Result
Tax is applied only to positive pre-tax profit and ignores loss carry-forwards, depreciation schedules and local rules. Use it for planning, not for filing.
Get a Free Business AuditHow the calculation works
Revenue less all costs: direct costs, overhead, interest, depreciation and tax. It is the figure that says what the business earned, and in an owner-operated business it is only meaningful if the owner's own labour has been paid a market rate before the remainder is called profit.
What moves the number
- Whether owner compensation is above the line.
- Interest and tax, which gross profit ignores.
- Depreciation, which is a non-cash charge.
- One-off items in the period.
Where this one goes wrong
An owner-operated business reporting net profit without paying the owner a market wage is reporting unpaid labour, and the distinction decides whether the business is worth more than the job it provides. Pay the owner first. Depreciation is the other item to understand rather than ignore, since it reduces profit without consuming cash, which is part of why a profitable business can be short of money and an unprofitable one can have plenty.
Before you quote
- Pay the owner a market wage before calling the remainder profit.
- Strip one-off items before reading a single period.
- Read net profit alongside the cash position.
Questions
About this calculator
Should the owner's wage come out before net profit?
For the figure to mean anything, yes, at a market rate for the work actually done. A business reporting profit while paying the owner nothing is reporting unpaid labour, and that decides whether it is worth more than the job.
Why is my profitable business short of cash?
Because profit and cash are different. Depreciation reduces profit without consuming cash, receivables are revenue that has not arrived, and capital spending consumes cash without reducing profit. All three can run at once.
What distorts a single period's net profit?
One-off items: an unusual gain, a large non-recurring cost, or a timing effect. Stripping them out is what lets the underlying trend be read, and a single period with any of them in it describes very little.
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How to use this calculator
- Revenue ($). Enter your own figure; the page starts at $480,000.
- Cost of goods sold ($). Enter your own figure; the page starts at $324,000.
- Operating expenses ($). Rent, admin wages, insurance, software, marketing, vehicles.
- Interest and other costs ($). Enter your own figure; the page starts at $8,000.
- Tax rate (%). Enter your own figure; the page starts at 21%.
The result updates as you type, so you can try a figure, see what it does to net profit after tax, and change it back. Nothing you enter is sent anywhere or saved.
A worked example
These are the figures the calculator opens with. Every number in the results column below is produced by the same calculation the page runs, so you can follow it through before putting your own figures in.
What goes in
| Input | Value |
|---|---|
| Revenue | $480,000 |
| Cost of goods sold | $324,000 |
| Operating expenses | $96,000 |
| Interest and other costs | $8,000 |
| Tax rate | 21% |
What comes out
| Result | Value |
|---|---|
| Net profit after tax main result | $41,080 |
| Net margin | 8.56% |
| Operating profit | $60,000 |
| Tax | $10,920 |
From 480,000 of revenue you keep $41,080 after everything, a 8.56% net margin.
How sensitive the answer is
Holding everything else steady and changing only revenue, this is what happens to net profit after tax. It is worth knowing which of your inputs the answer actually hinges on, and which barely move it.
| Revenue ($) | Net profit after tax |
|---|---|
| $240,000 | -$188,000 |
| $360,000 | -$68,000 |
| $480,000 example above | $41,080 |
| $720,000 | $230,680 |
| $960,000 | $420,280 |
Every other input is held at the example value while this one changes, which is not how a real job behaves. Treat it as a guide to which number matters most, not as five separate quotes.
What each figure means
- Revenue ($)
- A money amount, starting at $480,000.
- Cost of goods sold ($)
- A money amount, starting at $324,000.
- Operating expenses ($)
- Rent, admin wages, insurance, software, marketing, vehicles.
- Interest and other costs ($)
- A money amount, starting at $8,000.
- Tax rate (%)
- A percentage, between 0 and 100, starting at 21%.
What the results tell you
| Result | What it is |
|---|---|
| Net profit after tax | The headline result. A money figure. |
| Net margin | A percentage. |
| Operating profit | A money figure. |
| Tax | A money figure. |
Where these figures usually mislead
Business calculations assume the inputs are steady. Seasonality, a few large customers, and slow payment all break that assumption. A figure that looks healthy annually can still leave you short in a given month.
Keep going
Related calculators
Gross Profit Calculator
Works gross profit, where what counts as cost of goods sold decides it.
Open calculatorProfit Margin Calculator
Works profit margin, where three different margins answer three different questions.
Open calculatorCash Flow Calculator
Works cash flow, which is a different statement from profit.
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