How to calculate profit
Profit is revenue minus expenses. For gross profit, you subtract some expenses. For net profit, you subtract all expenses.
Gross profits and operating profits are steps on the road to net profits. Net profits are what you truly get to keep.
Profits indicate you’re earning more than you spend:
- Gross profit shows you’re selling goods and services for more than they cost you
- Operating profit shows you’re making money after paying expenses other than interest
- Net profit shows you’re making money after paying all expenses and taxes
See related terms
How to manage your finances and cash flow
Learn about money management for your small business
This glossary is for small business owners. The definitions are written with their requirements in mind. More detailed definitions can be found in accounting textbooks or from an accounting professional. Xero does not provide accounting, tax, business or legal advice.