What is the formula for determining net profit?

What is the formula for determining net profit?

• A. Net profit = Value of investment - Cost of investment
• B. Net profit = Value of investment x Cost of investment
• C. Net profit = Value of investment / Cost of investment
• D. Net profit = Value of investment + Cost of investment

Answer: (A)

Net profit is the amount left after you subtract the cost of an investment from what the investment is worth or returns. In this case, the Value of investment represents what you gain or recover, and the Cost of investment is what you spent. Therefore, net profit is Value of investment minus Cost of investment. The other operations would not reflect profit: multiplication would scale the result, division would give a ratio, and addition would simply add costs back in rather than show the actual gain after costs. If the value is less than the cost, you’d have a loss.

Net profit is the amount left after you subtract the cost of an investment from what the investment is worth or returns. In this case, the Value of investment represents what you gain or recover, and the Cost of investment is what you spent. Therefore, net profit is Value of investment minus Cost of investment. The other operations would not reflect profit: multiplication would scale the result, division would give a ratio, and addition would simply add costs back in rather than show the actual gain after costs. If the value is less than the cost, you’d have a loss.