Answer Posted / dkgm
Here is how you reach net profit on a P&L (Profit & Loss) account:
Sales Revenue = Price (of product) X Quantity Sold
Gross profit = sales revenue – cost of sales and other direct costs
Operating profit (EBIT, earnings before interest and taxes) = Gross profit – overheads and other indirect costs
Pretax Profit (EBT, earnings before taxes) = operating profit – one off items and redundancy payments, staff restructuring – interest payable
Net profit= Pre-tax profit – tax
Retained earnings = Profit after tax – Dividends
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