Plain definition
Net profit is the profit remaining after all recognised income and expenses for the period, including financing and tax according to the reporting framework. It is an accounting measure and does not equal cash generated.
Illustrative example
Monetary examples use Saudi riyals (SAR). The same principles apply in other currencies.
A company reports operating profit, financing cost, and tax, leaving net profit. The owner does not treat it as cash: a large customer still has not paid.
The owner sees net profit and plans a dividend. The cash forecast shows still uncollected and a tax payment due next month, so the board waits until usable cash and obligations are tested.
Why it matters
Net profit includes non-cash accruals and can be lifted or reduced by financing and tax choices. It is not a payout calculation.
Practical consequence
Reconcile net profit to operating cash flow, identify material one-off, interest, and tax items, and approve distributions only after the dated liquidity plan.