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 from operating profit (earnings before interest and taxes).
The various deductions (and their corresponding metrics) leading from Net sales to Net income are as follow:
- Net sales = Gross sales - (Customer Discounts, Returns, Allowances)
- Gross profit = Net sales - Cost of goods sold
- Operating Profit = Gross Profit - Total operating expenses
- Net income (or Net profit) = Operating Profit – taxes – interest
(Note: cost of goods sold is calculated differently for a merchandising business than for a manufacturer.)
Famous quotes containing the words gross and/or profit:
“There is not a more disgusting spectacle under the sun than our subserviency to British criticism. It is disgusting, first, because it is truckling, servile, pusillanimous—secondly, because of its gross irrationality. We know the British to bear us little but ill will—we know that, in no case do they utter unbiased opinions of American books ... we know all this, and yet, day after day, submit our necks to the degrading yoke of the crudest opinion that emanates from the fatherland.”
—Edgar Allan Poe (1809–1845)
“... when you make it a moral necessity for the young to dabble in all the subjects that the books on the top shelf are written about, you kill two very large birds with one stone: you satisfy precious curiosities, and you make them believe that they know as much about life as people who really know something. If college boys are solemnly advised to listen to lectures on prostitution, they will listen; and who is to blame if some time, in a less moral moment, they profit by their information?”
—Katharine Fullerton Gerould (1879–1944)