Formula
Net profit removes every cost stack, then divides by revenue:
Net margin = (revenue − cost of goods − operating expenses − interest and tax) / revenue
A zero in interest and tax means you are not subtracting those items.
Assumptions
- Each cost is entered once.
- The amounts belong to the same period as the revenue.
Worked example
Revenue of $100,000.00, goods of $40,000.00, operating expenses of $35,000.00, and interest and tax of $5,000.00 produce a net profit margin of 20.00%.
Input definitions
- Operating expenses
- Costs of running the business that are not the cost of goods, such as rent and wages.
- Interest and tax
- Financing cost and tax you want removed before the net result. Zero is allowed.
Limitations
This is a planning estimate, not accounting, tax, payroll, or advertising advice. The currency control changes the symbol only.
Questions
Why not use one cost field?
The profit margin page does that. This page keeps goods, operations, and interest and tax separate so the stack is visible.
Is this a tax return?
No. You type the tax amount. The page does not apply a tax table.