Check Your Profit Margin

Profit is a financial benefit that is realised when the amount of revenue gained from a business activity exceeds the expenses, costs and taxes needed to sustain the activity. .

There are three kinds of Profit.

Gross profit is subtracting your sales from the cost of goods sold. Sales is the first line item on the income statement, and the cost of goods sold (COGS) is usually listed just below it. For instance, if your business has N10,000 in sales and a COGS of N6,000, it means the gross profit is N4,000, or N10,000 minus N6000. 

Operating profit is calculated by deducting operating expenses from gross profit. This is invariably profitability after operating expenses. If your business has N2,000 in operating expenses, the operating profit is N4,000 minus N2,000, equaling N2,000.

Net profit is the income left after all expenses, including taxes and interest. If interest is N500 and taxes are another N500. Net profit is calculated by deducting both of these from operating profit. In the business instance we’ve been using, the answer is N2000 minus N1000, which equals N1000.

Use this statistics with your business and discover if you are on a good profit margin or not.




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