Income – expenses = profit.
Make a profit or you’re toast.
Income – direct expenses = gross profit.
Gross profit = administrative expenses = net profit.
We can say it a lot of ways, but you have to understand it.
Revenue (the dollars you collect, not sales) – Cost of sales (direct expenses such as materials, labor and sales commissions) = Gross Profit (You run the company on gross profit. If your gross profit is too low, you can’t make much money or scale or make it up on volume very easily at all) – General and Administrative Expenses (“Fixed costs” that you have to pay even if you don’t sell anything, such as rent and insurance and people in the office and many managers and vehicles, etc.) = net profit.
Know your costs, look at your financial statements, ask questions and understand the arithmetic.
It’s not that hard. The leader is responsible to make a profit, not the accountants.
Hi Larry,
Thanks for the daily Think Daily inspirational thoughts.
I believe that the “=” between “Gross profit” and “administrative expenses” should be a “-“. Here is what is shown in the blog:
Gross profit = administrative expenses = net profit.
I think it should be the following:
Gross profit – administrative expenses = net profit
Kind regards,
Todd DeMonte
“Gross profit = administrative expenses = net profit.”
Larry you may want to change that first equal sign to a “-“ minus sign.
Thanks for all you do.
Larry. Great explanation! Would you please emphasize one item net minus taxes?