What is net profit?

Definition of net profit

Net profit is a business's income less all of its day-to-day running costs, but before any tax or interest due to the bank, is taken off.

A business's net profit divided by its sales equals its 'net profit margin', which is a very useful indicator as it shows how much profit the business is making for every pound it earns in sales. Net profit margin is always written as a percentage. It's useful to compare this year's net profit margin to last year's, and to compare the actual net profit margin to how much you expected it to be according to your business plan, to see how well your business is doing.

Got questions? Ask Emily!

FreeAgent's Chief Accountant Emily Coltman is available to answer your questions in the comments.

Bookkeeping and tax tips

We'll keep your email safe · Read our privacy policy