Net profit: how to calculate, formula, examples

Index
    Чистая прибыль
    Net profit

    Net profit is almost the most important indicator that reflects whether an enterprise works efficiently, i.e. . determines its profitability. An increase in this indicator indicates that the company is developing and working more efficiently, while a decrease, on the contrary, indicates the ineffectiveness of management decisions.

    The net profit indicator is notable for the fact that the calculation takes into account a number of data, including production costs, employee wages, various types of taxes and other expenses.

    Below we will examine in detail what net profit is, what it depends on, how it is calculated, and also explain the difference with gross profit.

     

    What is net profit

    Чистая прибыль предприятия
    Net profit of the enterprise

    Net profit ( net profit ) is the profit on the balance sheet of the enterprise, remaining after covering all expenses, including the cost of production, taxes, employee salaries, fees and other payments.

    ☝️
    In simple terms, this is the difference between the company's income from sales of products and the cost of its production.

    Net income reflects the profitability of the business. It shows how effective one or another business is: whether it is worth continuing to engage in a particular business or whether it would be better to close it or change the field of activity.

    Also, a sharp drop in net profit may indicate the need for an audit of the enterprise in order to reduce potential costs and expenses.

    Net operating profit

    Чистая операционная прибыль
    Net operating profit

    Net operating profit ([ 19459037] net operating profit less adjusted taxes ) is the post-tax profit, or operating profit after deduction of all types of taxes. This indicator allows you to determine the part of the cash that will remain after deducting the cost of production and paying all taxes.

    Net operating profit is determined by the following formula :

    NOPLAT = EBIT - NP + (UE x (1-t)),

    ]

    where

    • EBIT - profit before tax and interest;
    • NP - income tax;
    • Unitary enterprise - interest paid;
    • t - income tax rate.

    Net profit in the balance sheet

    Прибыль в балансе
    Profit in the balance sheet

    [194590358] profit in the balance sheet is a value that displays the amount of retained earnings, of which net profit for the current period is also a part.

    ☝️
    Is reflected in line 1370 of section III “Capital and reserves”.

    The line allows you to calculate net profit. The following formula is used for this:

    PE = NP (at the end of the current year) - NP (at the end of last year),

    where [ 19459009]

    • PE - net profit;
    • NP - retained earnings.

    The above formula is used if the company did not pay dividends in the current period, otherwise net profit will be calculated using a slightly more complex formula:

    PE = NP (at the end of the current year) - NP (at the end of last year) + D,

    where

    • PE - net profit;
    • NP - retained earnings;
    • D - the amount of dividends.

    There is also another way to get data on net profit in the balance sheet. For this, data from line 2400 “Net profit (loss)” are used.

    Net profit of the enterprise

    Чистая прибыль предприятия
    Net profit of the enterprise

    Net profit of the enterprise is one of the most important indicators of the effectiveness and profitability of its work. It reflects how efficiently the company conducts business, disposes of existing assets, how fast and stable its growth and increase of attractiveness for investors.

    It is important to distinguish between the concept of net profit and income. If income reflects the entire money supply involved in production, then net profit is the amount that the company received after deducting all costs and expenses. Those. we can say that net profit is one of the components of income. The diagram below illustrates this very clearly:

    Структура дохода предприятия
    Enterprise income structure

    After receiving the net profit, it can be used in four directions:

    1. Cost estimates for further production or increase in its volume.
    2. Accumulation fund (for modernization of production, social development fund, reserve fund).
    3. Consumption fund (employee bonuses, improvement of working conditions).
    4. Payment of dividends to shareholders.

    What you need to know when calculating net profit

    Бухгалтерский учет
    Accounting

    During calculation of net profit, the main difficulties arise when accounting for income and expenses in various financial documents of the company, such as accounting, tax and management accounting. Among the main causes of inconsistencies is the following:

    When accounting for revenue: , the main problem is in different methods of accounting for revenue. So, in accounting, the accrual method is mainly used, while in tax accounting, both the accrual method and the cash approach can be used.

    When accounting for expenses: whereas absolutely all expenses are taken into account in accounting, certain types of expenses are not taken into account in tax accounting, in particular those that are covered for personal funds of a state of emergency (private entrepreneur), for example, fines and penalties paid, daily allowances for business trips.

    When creating reserves: this includes pledged payments of employee bonuses, holidays, unforeseen debts. In tax accounting, reserves may not be taken into account at all, while in accounting their accounting is mandatory.

    Due to the difference in the approach to calculating income, expenses and reserves in accounting and tax accounting, the final net profit indicator will differ.

    Other important points that need to be taken into account when calculating net profit:

    • Calculation should be made “on an accrual basis” - after the goods have been shipped or costs have been written off, regardless of whether whether the actual payment or not;
    • For calculations, you need to take data from documents on profit and loss;
    • Net income is usually calculated once a month (usually at the end of the month);
    • The calculation of net profit can be automated using special programs;
    • At the end of the calculation of net profit, you must remember to take away the costs of paying all taxes and fees.
    ☝️
    It is also worth saying that to fix the company's net profit it’s worth entering a separate document, for example, in Microsoft Excel, and filling it in at the end of each months.

    This document can be compiled as in the example below:

    Пример документа для фиксации чистой прибыли
    An example of a document for recording net profit

    ] It can be compiled for any of the reporting periods: month, quarter, year.

    How net profit is calculated

    Как рассчитать чистую прибыль
    How to calculate net profit

    How net profit is calculated:

    [ 19459053]

  1. Calculate the revenue.
  2. Calculate operating expenses.
  3. Calculate EBITDA (business capacity).
  4. Calculate the total costs of loans, depreciation and taxes.
  5. Calculate the net profit of the company.
  6. Below, each of the calculation steps will be discussed in more detail.

    We also recommend that you look at some tips that will help you calculate your net profit:

    Net profit calculation tips
     

    Net profit formula

    The net profit calculation formula is primarily needed to enter the indicator in the OFR (Statement of Financial Results) - line 2400 .

    The net profit formula looks like this:

    PE = V - SS - UR - KR + PD - PR - NP,

    [ 19459008] where:

    • PE - net profit;
    • B - revenue;
    • SS - cost of sales;
    • SD and KR - administrative and selling expenses;
    • PD and PR - other income and expenses;
    • NP - income tax.

    In this case, filling the line 2400 OFR looks like this:

    p. 2400 = p. 2110 - p. 2120 - p. 2210 - p. 2220 + p. 2310 + p. 2320 - p. 2330 + p. 2340 - p. 2350 - p. 2410

    Explanation of each line:

    • 2110 - “Revenue”;
    • 2120 - “Cost of sales”;
    • 2210 - "Selling expenses";
    • 2220 - “Administrative expenses”;
    • 2310 - “Income from other organizations”;
    • 2320 - “Interest receivable”;
    • 2330 - “Interest payable”;
    • 2340 - “Other income”;
    • 2350 - “Other expenses”;
    • 2410 - “Income tax”.

    The procedure for calculating net profit

    Процесс расчета прибыли
    The process of calculating profit

    As mentioned above, the calculation of net profit consists of several stages, which will be discussed in detail below.

    Revenue calculation

    ☝️
    The main rule when calculating revenue: remember that revenue is not equal to the money received.

    Revenue can only be considered funds received for obligations already fulfilled. For example, if a customer has already received the goods, and you have only an invoice in your hands, but money will be paid only at the end of the month - this is revenue. And, on the contrary, if the client paid in advance, but didn’t receive the goods yet, the goods or services, this money is not included in the calculation of revenue - they are simply frozen on the “deposit”.

    Revenue is calculated according to the following formula:

    В = КС х Ц,

    where

    • В - revenue;
    • КС - the number of transactions;
    • Ц - transaction price.

    Calculation of operating expenses

    Operating expenses are all expenses excluding funds that were invested in the development of the company, as well as the profit of the business owner. Costs are fixed and variable. Constants include, for example, rent, the purchase of supplies, a fixed rate in the payment of employees. Variables include, for example, the percentage of sales that is included in the salary of employees.

    Calculation of EBITDA (business capacity)

    EBITDA (earning before interest taxes depreciation amortization) is a financial indicator that takes into account data on revenue and operating expenses, excluding tax expenses, depreciation and loan repayments.

    Calculated by the following formula:

    EBITDA = B - PR ,

    where

      [19459011 ] In - revenue;

    • OR - operating expenses.

    If EBITDA is positive, then the company earns revenue, i.e. “Works as a plus”, if zero or negative, the business is not profitable.

    Calculation of other expenses (loans, depreciation of equipment)

    ☝️
    Only the monthly percentage of service should be written in the line about the loan.

    The body of the loan is recorded in depreciation of equipment, as if you bought it for the money that is available. Moreover, this amount must be divided into several months / years, for example, for the period while the equipment will work efficiently.

    Calculation of taxes

    Расчет налогов предприятия
    Calculation of company taxes

    The amount of taxes depends on the taxation scheme used by the company : traditional, simplified, UTII or EKHN. You also need to include tax on employee salaries in the report. But VAT (value added tax) does not need to be paid, since in essence VAT is paid by the end user, and not by the manufacturer or distributor.

    Calculation of net profit

    Roughly speaking, net profit is the difference between revenue and all expenses and taxes. The simplified formula of net profit looks like this:

    PE = EBITDA - PR - N,

    where

    • PE - net profit;
    • PR - other expenses;
    • N - taxes.

    Example of calculating net profit

    Using the above algorithm, we give an example of calculating net profit.

    Sweet World shipped 100,000 cakes worth 2,000 rubles each, subject to a 50% payment in the middle of the month, and another 50% at the end of the month. At the same time, the monthly rental of the workshop is 5,000 rubles per month, the salary of one confectioner is 12,000 rubles (three confectioners work in production), the cost price is 300 rubles per product. At the beginning of the month, the owner borrowed a refrigerator for 200,000 rubles for two years at 12% per annum. The company operates according to the traditional scheme and pays 18% of the profits and 13% of the salary of employees.

    Calculate revenue: revenue in this case is the amount received for 100,000 cakes sold:

    B = 100,000 x 2,000 = 200,000,000 rubles [ 19459038]

    We calculate operating expenses: these include the rental of a workshop, the factory floor for three confectioners and the cost of production:

    OR = 5,000 + 12,000 x 3 + 100,000 x 300 = 5 000 + 36 000 + 30 000 000 = 30 041 000 rubles

    We calculate EBITDA: that is the amount of operating expenses must be subtracted from the revenue:

    EBITDA = 200,000,000 - 30,041,000 = 169,959,000 rubles

    We calculate other expenses : this includes the interest on the loan, which is 2,000 rubles per month and the cost of depreciation of the refrigerator. Suppose that the refrigerator will work properly for three years (36 months), so the monthly depreciation cost will be 5,555 rubles:

    PR = 2,000 + 5 555 = 7 555 rubles [ 19459009]

    We calculate taxes: we need to calculate two taxes - on profit and on salary of employees.

    Income tax: 200,000,000 x 18% / 100% = 36,000,000 rubles

    Payroll tax: 36 000 x 13% / 100% = 4 680 rubles

    Now let's calculate the total amount of taxes:

    Н = 36 000 000 + 4 680 = 36 004 680 rubles

    And now, finally, you can calculate the net profit of the enterprise:

    PE = 169 959 000 - 7 555 - 36 004 680 = 133 946 765 rubles

    Such a good profit was obtained 🙂

    Gross profit and net profit - differences

    Валовая и чистая прибыль

    [19 459005] Gross and net profit

    Gross profit is the difference between the income from the sale of products and the cost of goods. Gross profit, as opposed to net profit, excluding operating and other expenses, as well as taxes paid.

    A very simple formula is used to calculate gross profit:

    VP = B - SP,

    where

    [ 19459046]

  7. VP - gross profit;
  8. B - revenue;
  9. Joint venture - the cost of production.
  10. Есть также более простой способ расчета валовой прибыли — нужно умножить наценку, если она одинакова для всех позиций, на сумму проданных товаров. Однако такой способ подходит в основном только для товаров с одинаковой ценой.

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