Net profit is the most important indicator of the work of an enterprise

In a market economy, modern enterprises, or rather their managers, must have a body of knowledge and skills to "stay afloat." Ignorance of the basic rules and laws of doing business leads to disastrous results, and it comes very quickly. In the article below, an attempt will be made to deal with such a notion as net profit - the most important factor that influences the profitability of any enterprise and the analysis of which makes it possible to understand whether it is worthwhile to conduct and develop the business further, or to look for other opportunities for earning.

In theory, net profit is part of the balance sheet profit of each enterprise, which remains at the disposal of the owners or shareholders after all taxes, fees, deductions have been paid and other obligations to the budget are met. In most cases, net profit is used to increase the current assets of the enterprise, to form funds and reserves, and also to effect reinvestment in production.

Of course, there is a dependence of the volume of net profit on the volume of gross profit, as well as the amount of taxes. In addition, it is on the basis of the amount of available net profit that dividends are paid to the shareholders of the company.

The indicators of net profit for each enterprise are very important. Net profit can be considered the result of the activities of the enterprise, for the period in which this profit was demonstrated. The indicator of net profit clearly demonstrates the amount of funds received by the enterprise after payment of all tax collections, payment of wages, as well as other payments that are mandatory. It is clear that an increase in net profit means that the company has worked well in a certain period and, conversely, a decrease in its indicators, and especially their departure into "minus" means that certain measures should be taken to prevent bankruptcy. That is why it is important to know how the net profit is determined. The simplest instruction on calculating this most important indicator is given below.

1. Calculating net profit is not such a difficult task. Initially, you need to determine the time period for which you will calculate.
2. In addition to the time period that calculates net income, a person will need a formula for making all the calculations.
3. The net profit (PE) of an enterprise can be determined if the indicators presented by gross profit (VP), financial profit (FP), the amount of taxes (HF) paid for the period, other operating profit (OP) are known.
4. To calculate net profit, the following simple formula is most often used

ЧП = ФП + ВП + ОП - СН

1. The calculation of net profit requires the data contained in the financial statements.
2. Determination of gross profit, requires data provided by revenue for a defined period and the cost of production. To get the gross profit from the first indicator you need to subtract the second one.
3. Operating income is determined as the difference between other operating income and expenses for the period. Financial profit is calculated by subtracting from the financial income of expenses included in this category.
4. After calculating all the necessary indicators, you can determine and net profit. In the event that the net profit is demonstrated by the indicator with the sign "-", we can state that the enterprise worked at a loss.

Net profit can be used by the enterprise for any purpose. Most often, according to the decision of the management, the net profit is directed to the payment of expenses incurred by the enterprise at the current time. Quite often the net profit is accumulated or used for charitable purposes.