What is Net Profit? Some Examples to Increase Net profit.

Definition of Net Profit.

The utility is the interest or benefits you get from something. The concept comes from the Latin utilities, which means “useful quality.” In particular, we can add that it is made up of the following parts: “uti,” which is synonymous with “being able to be used”; “-Ilis,” which is indicative of “possibility” and the suffix “-dad,” which is equivalent to “quality.” This term was widely used in the field of economics and finance to name the gain that is achieved from a good investment .

Net Profit

This means that if a person invests $ 1,000 in the purchase of clothing that he then resells for a total of $ 1,500, he will have achieved a profit of $ 500 in operation.

Net, on the other hand, is an adjective that is used to mention a clean and resultant amount (in the sense of being well defined). In addition to the above, we can determine that it is a word that has its etymological origin in French. Thus, we discover that it emanates from the word “net,” which can be translated as “without spots, clean.”

The net profit is the profit that is obtained after making the corresponding discounts. It is about the concrete utility that the subject or the company receives in hand.

For example, a company makes the monthly balance with a record that indicates income for 100,000 pesos. Said money had entered the coffers of the company, but that does not mean that everything is profit. The company also has expenses to bear, such as paying taxes, buying raw materials, etc. The net profit will be the amount that results from subtracting these expenses from income. If the entity had expenses of 60,000 pesos, the net profit for the period was 40,000 pesos (the 100,000 pesos of income minus the 60,000 pesos of expenses).

This allows us to infer that a company can increase its net profit without increasing its income since it would also achieve it if it manages to cut its expenses.

Sometimes the net profit is often confused with the gross profit, but it must be clear that they are different. Thus, the latter could establish that is obtained by subtracting the income of a company for the sale of services and goods what would be the money that costs to produce those.

This aforementioned gross profit also does not make use of the general expenses nor of the financial costs, such as interest payments established on debts or taxes.

Both a type of utility and another is important to establish that they are vital in determining the success of a company in question. In the same way, they are also used to show the vulnerability of any entity.

In particular, when we say vulnerability, we are referring to the ability that can have to be able to face every one of the effects, adverse or not, that may occur at a certain time and between which situations would be encountered of crisis.