List the three types of expenses deducted from gross profits to derive net profits.

Answer 1

To derive net profits from gross profits, businesses typically deduct three main types of expenses:

1. Operating Expenses: These are costs incurred during the normal course of business operations and include rent, utilities, salaries, depreciation, and other overhead costs.

2. Interest Expenses: This includes the cost of borrowing money, such as interest paid on loans or credit lines, which is deducted when calculating net profits.

3. Taxes: Income taxes owed to federal, state, and local governments are subtracted from gross profits to determine net profits.

These deductions help in arriving at the net profit, which is a key indicator of a company's profitability.