What is net profit calculated after?

Net profit is calculated after accounting for all expenses related to running a business. This includes labor costs, material costs, and overhead costs. The key step in calculating net profit is to start with gross profit, which is derived from total revenue minus the cost of goods sold (COGS).

Once gross profit is established, you then subtract all operating expenses, which encompass overhead costs—these are essential and recurring costs associated with the general operation of the business that aren't directly tied to producing goods or services. This would include rent, utilities, salaries for staff not directly involved in production, and other administrative expenses.

Therefore, net profit represents the actual profitability of a business after all of these costs—including overhead—have been deducted from gross profit. Understanding this hierarchy of profit calculation helps in assessing the overall financial health of the plumbing enterprise or any other business.