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  1. Nov 2018
    1. Here is how you reach net profit on a P&L (Profit & Loss) account: Sales revenue = price (of product) × quantity sold Gross profit = sales revenue − cost of sales and other direct costs Operating profit = gross profit − overheads and other indirect costs EBIT (earnings before interest and taxes) = operating profit + non-operating income 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

      $$Sales Revenue = (Price Of Product) - (Quantity Sold)$$

      $$Gross Profit = (Sales Revenue) - (Cost)$$

      $$Operating Profit = (Gross Profit) - (Overhead)$$

      Earnings Before Interest and Taxes (EBIT) $$EBIT = (Operating Profit) + (Non-Operating Income)$$ Earnings Before Taxes (EBT) $$EBT = (Operating Profit) - (One Off Items, Redundancy Payments, Staff Restructuring) - (Interest Payable$$

      $$Net Profit = (EBT) - (Tax)$$

      $$ Retained Earnings = (Net Profit) - (Dividends)$$