Net Profit

Net profit is the same as net income or net earnings. Accountants use these terms interchangeably. Let’s take a very simple example. Let’s say Tyler, a preschooler, decides to set up a lemonade stand. In this case, his revenue would be the money that he receives from his customers by selling lemonade.

But this is not his net profit. Now he needs to deduct all the expenses he incurred to sell that lemonade from his revenue such as the ingredients, the stand, his labor charges, advertising, etc. The amount he has leftover is his net profit.

If the lemonade stand doesn’t accrue enough revenue, Tyler may have to bear net loss i.e. when the expenses incurred are higher than the revenue generated. If Tyler’s revenue and expenses are the same, he is at a break-even point, i.e. neither profit nor loss.

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