What does net profit take into account that gross profit does not?

Net profit is a key financial metric that represents a company's actual earnings after all expenses have been deducted from revenue. It accounts for various costs that are not considered in the calculation of gross profit. Specifically, net profit includes operating expenses such as administrative costs, selling expenses, and other overheads, along with taxes that a business is required to pay.

Gross profit, on the other hand, is calculated by subtracting the cost of goods sold from total revenue. This means gross profit focuses solely on the direct costs associated with the production of goods or services sold, not considering operating expenses or taxes.

Therefore, the correct answer illustrates that net profit provides a more comprehensive view of a company's profitability by factoring in expenses that directly impact the bottom line, which gross profit does not consider. This distinction is crucial for stakeholders and investors as it helps them understand the true financial health of a business.