Finance: What are operating profits, net profits and gross profits?

What are operating profits, net profits and gross profits? Profits for a company can be calculated several different ways depending on what metric is being cited. Gross profits are measured by total revenues minus cost of goods or services sold. Of course, a company also has operating expenses, as well as depreciation and amortization, which are accounting deductions on equipment and other property belonging to the company. The Operating profit subtracts those elements from the Gross profit. The Net profit also factors in taxes and interest, which are also company costs that can apply against revenues. Naturally, the Net profit will result in the smallest number. Gross profit is also sometimes referred to as EBITDA, which is Earnings Before Interest, Taxes, Depreciation and Amortization.

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Transcript

00:28

profits .and the net thing is well pretty much taxes. so here's an income statement

00:33

yeah yeah revenues and then there's the cost of the stuff you're selling. okay

00:37

fine. we'll note the nets only cost a little bit to make and you sell them for

00:42

a fortune .way overpriced if you ask me. like whatever happened to line fishing

00:47

anyway lazy humans. so you have your revenues then your cost of goods sold.

00:51

all right well if you subtract those cogs from the revs you get your gross [income statement pictured]

00:56

profits. yeah gross just gross and sad frankly like why not eat more chicken

01:01

seriously. anyway .so then you have your costs of operating the business you know

01:06

overhead. secretaries and insurance and rent and fish-smell deodorizer. and then

01:11

you have operating profits after you subtract. them yep you subtract those

01:14

right from gross profits. get operating. so you made some number let's call it 10

01:18

million bucks why not .you know how many of my brethren died to give you that

01:23

money right? blood money. talk to Leo to see about it.

01:26

maybe he'll make a movie . anyway let's say the tax rates 30% well you'd pay 3

01:30

million in taxes on that 10 million of operating profit to then have net

01:35

profits of seven million dollars. lots of profits .there people. yeah hope you can [equation]

01:40

sleep at night.