Net profit and taxable income can be different because for tax purposes some expenses may or may not be allowable and some income may be assessable or not assessable. Net profit is available for distribution to shareholders as dividends. Each partner pays tax on the amount of net profit they receive, regardless of how much the partner may have taken out as drawings.Ĭompanies – salaries for working directors are treated as an expense along with employees’ wages. If there is no agreement, net profit is shared equally between the partners. Partners – if there is a partnership agreement, net profit is allocated according to the proportion set out in the agreement. You pay tax on the net profit regardless of how much you have taken in drawings. Sole traders – drawings (money taken by the owner for personal use) are not an expense. Your accountant can provide detailed advice regarding your structure. Your business structure will determine how some expenses are calculated. View our example profit and loss statement. More profitable businesses generally spend less of their income on expenses. A fall in net profit margin generally means you are paying more in expenses, which needs to be monitored. The net profit margin is an indicator of how much profit you make (before tax) from every dollar you spend. If your gross profit margin decreases over time you will need to determine the reason and take action to address the decline. The higher the gross profit margin the better, as your business keeps more from each dollar of sales. Gross profit is an indicator of efficiency. What percentage of the sale price covers the fixed costs of my business?Įxpenses as a percentage of sales/revenue What percentage of the sales price covers the cost of providing or producing the product or service? When reviewing your P&L it is useful to analyse four key benchmarks or performance indicators (KPIs). The net profit will show whether your business has earned or lost money. net profit (gross profit minus expenses)įormula: Sales – COGS = gross profit – expenses = net profit.The P&L will inform you whether your business made or lost money for the month under review. Usually produced monthly, this is a summary of income and expenses for your business.
0 Comments
Leave a Reply. |