Meaning of Gross profit

What is term Gross profit


In this article, the information about Gross profit is explained here

Gross Profit

Gross profit is the amount of revenue that a company earned before subtracting the expenses associated with that revenue. It is reported on the classified income statement. It's different from operating profit, which is actually gross profit minus operating expenses. It's also different from net profit, which is operating profit minus taxes and interest.

Gross profit is a company's total revenue (equivalent to total sales) minus the cost of goods sold. Gross profit is the profit a company makes after deducting the costs associated with making and selling its products, or the costs associated with providing its services.

Gross profit is net sales minus the cost of goods sold. (Some people use the term gross margin and gross profit interchangeably. Others use gross margin to mean the gross profit ratio or the gross profit as a percentage of net sales.)

Gross profit is presented on a multiple-step income statement prior to deducting selling, general and administrative expenses and prior to non-operating revenues, non-operating expenses, gains and losses.

In order to calculate gross profit, you must have two important figures. First, you must have the dollar amount of net sales for a given time period. Second, you must have the dollar amount for cost of goods sold (COGS). The formula for calculating gross profit is: Gross Profit = Net Sales - Cost of Goods Sold.

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