To calculate gross profit: examine the income statement, take the revenue and subtract the cost of goods sold. Also called "gross margin" and "gross income".
When analyzing a company, gross profit is very important because it indicates how efficiently management uses labor and supplies in the production process. More specifically, it can be used to calculate gross profit margin. Keep in mind that gross profit varies significantly from industry to industry. For example, take a look at the following situation to see how gross profit indicates a company's efficiency.
Company A and Company B both have $1 million in sales. Company A's cost of goods sold (COGS) is $900,000 and Company B's COGS is $800,000. Company A's gross profit will be $100,000 and Company B's gross profit will be $200,000. Company B spends less money to make the same amount of sales, and is therefore more efficient.
Investment dictionary. Academic. 2012.
Look at other dictionaries:
gross profit — gross margin; = gross profit margin The difference between the sales revenue of a business and the cost of sales. It does not include the costs of finance, administration, or distribution. Compare: net profit … Accounting dictionary
gross profit — gross margin; gross profit margin The difference between the sales revenue of a business and the cost of sales It does not include the costs of finance, administration, or distribution. Compare net profit … Big dictionary of business and management
gross profit — n ↑gross margin … Dictionary of contemporary English
gross profit — index proceeds Burton s Legal Thesaurus. William C. Burton. 2006 … Law dictionary
gross profit — noun count BUSINESS the difference between the price that someone sells goods for and what it costs to produce them … Usage of the words and phrases in modern English
gross profit — noun (finance) the net sales minus the cost of goods and services sold • Syn: ↑gross profit margin, ↑margin • Topics: ↑corporate finance • Hypernyms: ↑net income, ↑ … Useful english dictionary
Gross profit — In accounting, Gross profit or sales profit is the difference between revenue and the cost of making a product or providing a service, before deducting overhead, payroll, taxation, and interest payments. Note that this is different than operating … Wikipedia
gross profit — the excess of net sales over cost of goods sold usually expressed as a percentage. Glossary of Business Terms A subtotal on a firm s statement of income that is net sales minus cost of goods sold. Sometimes called gross profit on sales. American… … Financial and business terms
gross profit — UK / US noun [countable] Word forms gross profit : singular gross profit plural gross profits business the difference between the price that someone sells goods for and what it costs to produce them … English dictionary
gross profit — gross receipts less the cost of goods or production but before the deduction of such other costs as rent or salaries. * * * … Universalium