| N | |
| sales | 20,000 |
| cost of sales | 10,000 |
| operating expenses | 2,500 |
| expenses prepaid included in operating expenses | 500 |
A. N12,500
B. N10,000
C. N8,000
D. N7,500
Correct Answer:
Option D – N7,500
Explanation
Net profit, also referred to as the bottom line, net income, or net earnings is a measure of the profitability of a venture after accounting for all costs and taxes. It is the actual profit and includes the operating expenses that are excluded from gross profit. it represents the number of sales remaining after all operating expenses, interest, taxes and preferred stock dividends (but not common stock dividends) have been deducted from a company’s total revenue.
net profit = gross profit – expenses
10,000 – 2500 = 7,500
