What is net profit defined as?

Net profit is defined as the selling price minus all associated costs. This definition captures the essence of profitability by accounting for all costs incurred in the process of generating revenue, including not just the cost of goods sold but also the various operational expenses such as salaries, rent, utilities, and any other overheads.

When calculating net profit, it is critical to differentiate it from other financial metrics. For instance, gross profit is calculated by subtracting only the direct costs of goods sold from the selling price, which doesn't include operating costs. Similarly, other options might focus on narrower aspects of costs, such as inventory costs, which do not fully represent the complete financial picture needed to assess profit after all financial responsibilities have been taken into account.

Thus, recognizing net profit as the selling price minus all associated costs provides a comprehensive understanding of the actual earnings a business retains after covering all expenses.