Gross Profit vs Net Profit: What Is the Difference?
Your business sold ₦1 million worth of products this month. After paying your suppliers, you still have ₦400,000 left. You might say: “I made ₦400,000 profit.” But did you? Not necessarily. That ₦400,000 may be your gross profit . You may still need to pay rent, salaries, electricity, transportation, marketing, bank charges and other business expenses. After those costs are deducted, the amount remaining may be much smaller. That is why understanding the difference between gross profit and net profit is important for every business owner. The Problem Many small-business owners look at their sales and the amount left after buying stock and assume that is their final profit. For example: Sales = ₦1,000,000 Cost of products sold = ₦600,000 Money remaining = ₦400,000 The business owner may think: “I made ₦400,000 this month.” But suppose the business also spent: Rent = ₦50,000 Electricity = ₦20,000 Transportation = ₦30,000 Marketing = ₦25,000 Staff = ₦80,000 Other expenses = ₦15,000...