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Finance: What are operating profits, net profits and gross profits? 62 Views

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What are operating profits, net profits and gross profits? Profits for a company can be calculated several different ways depending on what metric is being cited. Gross profits are measured by total revenues minus cost of goods or services sold. Of course, a company also has operating expenses, as well as depreciation and amortization, which are accounting deductions on equipment and other property belonging to the company. The Operating profit subtracts those elements from the Gross profit. The Net profit also factors in taxes and interest, which are also company costs that can apply against revenues. Naturally, the Net profit will result in the smallest number. Gross profit is also sometimes referred to as EBITDA, which is Earnings Before Interest, Taxes, Depreciation and Amortization.

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00:00
finance a la shmoop.what are gross profits operating profits and net
00:07
profits? well the greatest fishing company that walks the earth or swims
00:12
the ocean made a fortune last year from selling nets. catching things like well [fish is caught from the ocean]
00:17
me. but that's really a different thing and no Bueno. leave us alone. in an
00:22
accounting sense net profits come after operating profits that come after gross

00:28
profits .and the net thing is well pretty much taxes. so here's an income statement
00:33
yeah yeah revenues and then there's the cost of the stuff you're selling. okay
00:37
fine. we'll note the nets only cost a little bit to make and you sell them for
00:42
a fortune .way overpriced if you ask me. like whatever happened to line fishing
00:47
anyway lazy humans. so you have your revenues then your cost of goods sold.
00:51
all right well if you subtract those cogs from the revs you get your gross [income statement pictured]
00:56
profits. yeah gross just gross and sad frankly like why not eat more chicken
01:01
seriously. anyway .so then you have your costs of operating the business you know
01:06
overhead. secretaries and insurance and rent and fish-smell deodorizer. and then
01:11
you have operating profits after you subtract. them yep you subtract those
01:14
right from gross profits. get operating. so you made some number let's call it 10
01:18
million bucks why not .you know how many of my brethren died to give you that
01:23
money right? blood money. talk to Leo to see about it.
01:26
maybe he'll make a movie . anyway let's say the tax rates 30% well you'd pay 3
01:30
million in taxes on that 10 million of operating profit to then have net
01:35
profits of seven million dollars. lots of profits .there people. yeah hope you can [equation]
01:40
sleep at night.
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