6.22What is net profit?
1What is it?
Net profit (PAT, profit after tax, the bottom line) is what remains after all expenses, interest and taxes.
2Why does it exist?
It belongs to shareholders. It funds dividends and reinvestment, and drives EPS.
3Quick revision
- Net profit = bottom line.
- Belongs to shareholders.
- Basis for EPS.
4Knowledge check
Q1. What does PAT stand for?Show answer
Profit After Tax.
Q2. Which ratio divides net profit by shares?Show answer
EPS.
Q3. Why might net profit jump one quarter?Show answer
A one-time gain such as selling an asset.
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