How is net profit calculated?

Net profit is determined by subtracting total expenses from total revenues. This calculation essentially reflects the amount of money that remains after all operating costs, interest, taxes, and other expenses have been deducted from the income generated by the company's activities. When revenues are greater than expenses, the result is a positive net profit, indicating that the business is operating efficiently and generating surplus funds. This is a critical measure for assessing a company's financial health, as it shows how effectively a company can turn sales into actual profit. Understanding this calculation is vital for contractors and business owners to analyze their financial performance and make informed decisions about their operations.