In accounting, net refers to the amount or quantity after deductions or expenses. Net income is calculated by subtracting all expenses from gross profit.
Net can also be used to describe other types of quantities, such as the total weight of a shipment after any packaging or other materials are removed.
Here are some examples of how the word “net” is used in business:
- Net income: The amount of profit left after all expenses are deducted from gross profit.
- Net margin: The percentage of gross profit that remains after all expenses are deducted.
- Net weight: The total weight of a shipment after any packaging or other materials are removed.
- Net number: The total number of items produced in a production run after any defects or rejects are removed.
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Here are some other terms related to gross and net:
- Gross margin: The difference between gross revenue and the cost of goods sold.
- Operating profit: The profit left after deducting operating expenses from gross profit.
- Net profit: The profit left after deducting all expenses from gross profit.
- Earnings per share (EPS): The net profit divided by the number of shares outstanding.
These terms are important for understanding a company’s financial performance. By tracking these metrics, investors can get a better understanding of how a company is generating revenue, managing expenses, and making a profit.