the difference between revenue, gross profit and nett profit in business
In: Other
Very simple explanation, not very detailed.
Revenue is the money you bring in from sales.
Whatever you’re selling has a cost (whether for the product and/or the people building that product, or cost of people performing a service), called cost of goods sold or cost of sales, and your gross profit = revenue – cost of goods sold.
You probably have other operating expenses you incur in the course of business, such as payroll for employees, rent for the office building, bank fees for processing CC payments, marketing expenses for advertising, and that is OpEx.
Operating Income = Gross Profit – Operating expenses
You could have taxes on top of that, so if you’re turning a profit
Net Income = Operating Income – Income Tax Expense
You have a business selling lemonade and you hire a 6 year old to man the table for you
Revenue = total dollars of lemonade sold by the 6 year old
Gross profit = total lemonade sales – cost of lemons/water/sugar/cups/ice
Net profit = total lemonade sales – cost of lemons/water/sugar/cups/ice – amount you paid 6 year old for working
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