Profit, also known as Profit in English, is the residual value of a company's revenue from its operating activities within a certain period after subtracting its costs and expenses. It is one of the important indicators of a company's financial health. There are three main types of profits: gross profit, operating profit, and net profit. At the same time, profit reflects the net value of changes in the company's assets and liabilities. The company's income is represented by an increase in assets and/or a decrease in liabilities, while the company's expenses are represented by a decrease in assets and/or an increase in liabilities. For example, an increase in a company's operating expenses is often reflected in an increase in accounts payable (liabilities) and a decrease in cash (assets). In this article, you will learn how to find these profit data from company financial reports. At the same time, you will learn the differences between gross profit, operating profit and net profit and what they represent. Cost of Goods Sold, referred to as COGS, refers to the costs directly related to selling products or providing services, usually including raw material costs, direct labor costs and manufacturing expenses. operating profit Operating profit is the value of a company's total revenue minus the cost of sales and operating expenses. The calculation formula is as follows: Operating Profit = Total Revenue – (Cost of Sales + Operating Expenses) Alternatively, it can also be understood that operating profit is the balance of the company's gross profit minus operating expenses. The formula is expressed as follows: Operating profit = gross profit – operating expenses Among them, Operating expenses refer to all operating, administrative, and selling expenses required for the company's daily business operations. For example, advertising expenses related to sales are operating expenses. However, operating expenses do not include interest payable, taxes, and non-operating expenses. Operating profit can reflect the operating efficiency and management level of the parent company. High operating margins generally indicate that a company is performing well in terms of cost control and business operations. net profit Net profit, also known as "net profit from continuing operations", is the balance of a company's operating profit plus other income (such as investment income), and then subtracting other expenses (such as interest expenses, taxes). Net profit is the ultimate profitability indicator of a company. Net income from continuing operations is the net income a company earns from its day-to-day operations and continuing operations. The calculation formula is as follows: Net profit = operating profit + other income - other expenses The company's other income may include dividend income from holding equity interests in other companies, interest income from holding bonds, and investment income from trading financial assets). Other expenses include the company's tax expenses, interest expenses, and other non-operating expenses. Net profit attributable to parent company Net profit attributable to the parent company refers to the company's net profit after deducting all expenses, taxes and minority shareholders' interests during a financial period. This part of the profit belongs to the shareholders of the parent company. For listed companies that own more than 50% of the equity but do not fully control subsidiaries, the net profit from continuing operations is not equivalent to the net profit attributable to the parent company. The parent company has a certain share in its subsidiaries. When calculating net profit from continuing operations, the subsidiary's income and expenses are calculated in the income statement. However, not all profits belong to the shareholders of the parent company. Therefore, when calculating the net profit attributable to the parent company, the profits belonging to minority shareholders need to be removed. The calculation method is as follows: Net profit attributable to the parent company = Net profit from continuing operations – Profit and loss of minority shareholders Among them, minority shareholders' profits and losses refer to the profits attributable to minority shareholders. If the subsidiary is profitable, then minority shareholders' profits and losses are positive numbers. On the contrary, if the subsidiary loses money, the minority shareholders' profit and loss will be negative, causing the net profit attributable to the parent company to be greater than the net profit from continuing operations. How to find profits from financial reports? You can find profits in the financial reports of public companies, here we use Apple's (AAPL) annual report as an example. The following is Apple’s annual report for September 2023: Source: SEC We summarize the important information in the following table: 10-K option name Chinese translation value in September 2029 (million) Total net sales total revenue 383,285 Total cost of sales214,137
Gross margin gross profit 169,148 Total operating expensesOperating expenses54,847 Operating income Operating profit 114,301 Other income/(expense), netProvision for income taxesOther expenses565 + 16,741 Net income net profit from continuing operations 96,995 So, Gross Profit = Total Revenue – Cost of Goods Sold = 383,285 – 214,137 = 169,148 = 169,148 – 54,847 = 114,301 Net profit from continuing operations = operating profit – other expenses = 114,301 – (565 + 16,741) = 96,995 Using the same steps, you can find Apple's profit data for the past ten years and plot it. The chart below shows Apple's net profit changes over the past ten years: How to find profits from broker software? Brokers recommended by the "U.S. Investment Guide" include: Interactive Brokers, Futu Moomoo, Robinhood, etc. At the same time, if you use tradingview, you can also find fundamental information about the company there. Here, we take Interactive Brokers as an example. 1. Log in to your IBKR account and click on the option [Fundamentals] on the upper right to view the company's fundamental information. 2. On the Fundamentals page, click the sub-option [Financials], and then click [Income], which refers to the income statement. You can choose to view annual or quarterly data. 3. Scroll the mouse to view gross profit, operating profit, net profit and other information. Taking net profit as an example, you can view the historical changes in net profit. Note that the net profit plotted in the chart below is the net profit before tax is paid, and the English translation is Net Profit before Tax. In addition to providing important fundamental information such as profits, Interactive Broker also provides fundamental data such as assets, liabilities, and cash flow. Once you've found data like profit, you can calculate important financial data like profit margins, earnings per share, and more. Financial reports of listed companies also include information such as profit margins and earnings per share. Summary Profit is an important indicator for studying a company's profitability. In addition to gross profit, operating profit, net profit, there is also profit before interest and taxes and profit before interest, taxes, depreciation and amortization. Read the related article to learn about the differences and connections.