In BTEC Business studies, net profit is an important concept that helps students understand how much money a business actually keeps after paying for all expenses. Net profit shows the real financial performance of a company, beyond just sales and revenue figures.

The Net Profit Formula

The formula for calculating net profit is:

Net Profit = Total Revenue – Total Expenses

Breaking Down the Formula

• Total Revenue: All the money earned from selling goods or services.
• Total Expenses: All costs, including raw materials, wages, rent, utilities, and taxes.

Example Calculation

Imagine a clothing store:

• Total Revenue: £50,000
• Total Expenses (supplies, rent, wages, etc.): £35,000
• Net Profit = £50,000 – £35,000 = £15,000

Why Net Profit Matters in Business BTEC

Net profit is essential because it shows the business’s ability to survive, grow, and reinvest. For BTEC Business students, understanding this formula helps when analyzing case studies, completing assignments, and making financial decisions in simulations.

Key Takeaways

• Net profit is the money left after all costs are deducted.
• It is a measure of success and efficiency.
• The formula is simple but very powerful for business analysis.