ITEC Professional Conduct and Business Awareness Practice Test

Net profit represents what remains after all costs have been subtracted from what the business earns. It is calculated by taking revenue (income from sales) and subtracting expenses (costs like salaries, rent, materials). When revenue is greater than expenses, you have profit; if expenses exceed revenue, you have a loss.

So the best description of net profit is revenue minus expenses. Subtracting in the reverse order would imply expenses exceed revenue (a loss) rather than profit. Adding revenue and expenses isn’t a standard measure of profitability, and assets minus liabilities refers to equity, not profit.