How to Calculate Retained Profit
- 1). Find the gross income of the company. The gross income refers to all the money the company has received for its products or services. As an example, say company X made $10 million last year servicing computers.
- 2). Add up all of the operational costs and expenses. This would include such items as salaries, materials and office leases. For the example, say that company X had $4 million in operational costs and expenses.
- 3). Subtract the operational costs from the gross income. For the example the equation would read:
$10,000,000 - $4,000,000 = $6,000,000
Gross Income - Operating Costs and Expenses = Net Income
The net profit of the company would be $6 million. - 4). Subtract the taxes. Can't forget good old Uncle Sam. Taxes are paid on the net income for a company. So, for the example, say that between state and federal taxes, company X owed 34 percent of its net income in taxes. The equation would read:
6,000,000 x .34 = 2,040,000
Net Income x Tax Rate = Retained Profit
After that money is paid to the government, company X would have a retained profit of 3,960,000.
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