Which statement best defines net profit?

Which statement best defines net profit?

• A. Gross profit minus operating expenses, interest, and taxes
• B. Revenue minus COGS minus operating expenses
• C. Revenue minus all expenses including taxes
• D. Gross profit minus depreciation

Answer: (B)

Net profit is the money left after subtracting the costs tied to earning revenue. Think of it in steps: you start with revenue, subtract the cost of goods sold to get gross profit, then subtract operating expenses to get the profit from core operations. The choice that matches this flow—subtracting COGS and operating expenses from revenue to show what remains from the business’s primary activities—best fits net profit in this context. The other options mix in or omit certain expenses in ways that align more with other profit measures (like operating profit or net income before interest and taxes), so they don’t align as well with the standard idea of net profit.

Net profit is the money left after subtracting the costs tied to earning revenue. Think of it in steps: you start with revenue, subtract the cost of goods sold to get gross profit, then subtract operating expenses to get the profit from core operations. The choice that matches this flow—subtracting COGS and operating expenses from revenue to show what remains from the business’s primary activities—best fits net profit in this context. The other options mix in or omit certain expenses in ways that align more with other profit measures (like operating profit or net income before interest and taxes), so they don’t align as well with the standard idea of net profit.