Net profit
In one sentenceWhat is left of revenue after deducting all costs and expenses, including finance costs and Zakat or tax; it is the last line of the income statement.
Simply put
Net profit is the figure added to retained earnings and from which distributions to the owners are made. If it is negative, it is a net loss.
Note: net profit does not mean cash in the bank, as part of it may be uncollected receivables or unsold inventory.
Worked example
An auto parts store has an operating profit of 90,000 SAR, made a gain of 10,000 SAR from selling an old car, paid finance costs of 15,000 SAR, and its estimated Zakat provision is 2,000 SAR.
Operating profit90,000
+ Other income10,000
− Finance costs(15,000)
− Zakat(2,000)
Net profit = 90,000 + 10,000 − 15,000 − 2,00083,000 SAR
Don't confuse it with
Operating cash flowsNet profit is an accounting figure on the accrual basis, and operating cash flow is the actual cash.