2017-02-15 00:00:00Profit & LossEnglishLearn how to differentiate net revenue, net profit, and net income. Plus, understand the situations in which each figure is most useful.https://quickbooks.intuit.com/ca/resources/ca_qrc/uploads/2017/06/Man-at-construction-site-views-net-revenue-on-laptop-near-blueprints-and-framing.jpgNet Revenue vs. Net Profit vs. Net Income

Net Revenue vs. Net Profit vs. Net Income

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Net revenue is the total amount of income earned from business operations. It is used to communicate the complete amount of revenue earned. Net profit digs a little deeper into the money earned by deducting the cost of goods sold. The cost of goods sold includes the materials, labor, and overhead assigned to a product. Net income goes even further by deducting all other expenses. For budgeting purposes, net revenue is the most useful projection. It is a useful figure to track growth because it is completely independent of expenses. However, for pricing and manufacturing decisions, net profit is most useful as it focuses only on what goes into the actual product. Management may typically make decisions on whether to continue selling a product based on the net profit of the good. Although net revenue and net profit are useful internal figures, external parties will care most about net income. Because net income incorporates all expenses, it is the only figure that truly encompasses all operations of a business. Internal management may find net income useful to track operational costs, but a major downside of net income is it includes uncontrollable costs. Ultimately, all three figures are important to know because they display different positions of a company. Net revenue looks at only money earned, net profit looks at only product or service activity, and net income looks at everything.

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Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.

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