How to calculate cumulative profit
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Figuring out the true cumulative profit of a business takes some time and mathematical effort.
The cumulative profit can refer to several total "net profit" numbers added together over a specific time frame; or the term can sometimes also be used as a synonym for "net profit" -- although technically the two terms are not usually the exact same thing. Knowing how to figure out cumulative profit is critical for any accounting or management department.
Define the time period for which you want to calculate the cumulative profit. This will determine what the exact formula and steps are, since figuring out the net profit for a quarter or year is much different than figuring out the cumulative profit a business has made over several quarters or years.
- Figuring out the true cumulative profit of a business takes some time and mathematical effort.
- This will determine what the exact formula and steps are, since figuring out the net profit for a quarter or year is much different than figuring out the cumulative profit a business has made over several quarters or years.
Once you decide on a time period, add together the gross (total) income the business made throughout that period. This is much easier if the time being measured is a conventional standard such as a month, a quarter, or a year. This number will be "G."
Take all the expenses during this time period, including pay, and add together those expenses to get a total number. This number will be "E."
Subtract E from G. This gives you the net profit as opposed to a gross profit. So G - E = NP.
Add up all the taxes paid by the company. Subtract this number "T" from your Net Profit. It's important to note that some companies have taxes added into their net profit numbers already, so skip this step if that is the case. Otherwise calculate NP - T. This will give you the cumulative profit for the time period.
If you have the net profit records for each year but want a true cumulative number, such as the last five years, then you can simply add together the net profit from all five years minus taxes paid to quickly get to your cumulative profit number.
- Remember that gross and net income are not the same number.
- Don't count taxes twice.
Monty Dayton is a professional freelance writer who has worked for the ACLU, Touchstone Publishing LLC, the University of Alaska, Fairbanks and many other employers. He holds a Master of Fine Arts in creative writing from the University of Alaska and loves writing about travel, the outdoors and health topics.